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Full text of "Hearing"

SAN FRANCISCO PUBLIC LIBRARY 



3 1223 03273 6440 




San Francisco Public Library 

Government Information Onter 
San Francisco Public Library 
100 Larkin Street, 5th Floor 
San Francisco, CA 94102 

REFERENCE BOOK 

Not to be taken from the Library 









L560 

no. at 



^ 



HEARING 

SENATE RULES COMMITTEE 

STATE OF CALIFORNIA 




STATE CAPITOL 

ROOM 3191 

SACRAMENTO, CALIFORNIA 

MONDAY, AUGUST 22, 1994 
10:40 A.M. 



DOCUMENTS DEPT. 

SEP 3 1994 



261-R 



SENATE RULES COMMITTEE 
STATE OF CALIFORNIA 



1 

2 
3 

4 
5 

6 
7 

HEAP: ' : : 
9 

10 

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12 STATE CAPITOI 

13 ROOM 3191 

1 4 SACRAMENTO, CALIFORNIA 
15 
16 
17 

18 MONDAY, AUGUST 22, 1994 

19 10:40 A.M. 
20 
21 
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23 
24 

25 Reported by: 
26 



Evelyn J. Mizak 
Shorthand Reporter 



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3 1223 03273 6440 



11 



APPEARANCES 
MEMBERS PRESENT 
SENATOR WILLIAM LOCKYER, Chair 

4 SENATOR WILLIAM CRAVEN, Vice Chair 

5 SENATOR RUBEN AYALA 

6 SENATOR ROBERT BEVERLY 

7 SENATOR NICHOLAS PETRIS 

8 STAFF PRESENT 

9 CLIFF BERG, Executive Officer 
PAT WEBB, Committee Secretary 



10 



11 RICK ROLLENS, Consultant on Bill Referrals 



12 



28 



NANCY MICHEL, Consultant on Governor's Appointments 



SENATOR KEN MADDY 



13 ALSO PRESEN T 

14 DONALD J. VALPREDO, Member 
California Horse Racing Board 

15 

16 

JACQUELINE E. SCHAFER, Chairperson 

1 7 State Air Resources Control Board 

18 CARL D. PERRY, President and Chief Executive Officer 
U.S. Electricar International 

JOHN R. TORRENS 

20 PG&E 

21 JIM GREENE 
Southern California Gas 

CECILE MARTIN, Deputy Director 

California Electric Transportation Coalition 

24 MICHAEL THOMAS 

California Trucking Association 

TOMMY ROSS 
26 Southern California Edison 



27 CINDY TUCK 

California Council for Environmental and Economic Balance 
California Grape and Tree Fruit League 



4 49383 SFPL: ECONO JRS 
75 SFPL 06/06/03 10 



Ill 



17 
18 
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APPEARANCES (Continued^ 

JOHN J. KENNEDY, Director of Advanced Applications 
Allied Signal Aerospace 

BILL NORTHROP, Executive Vice President 
Independent Oil Producers Agency 



RICHARD VIND, Chair and Chief Executive Officer 
Regent International 

NEIL KOCHLER, Partner 

7 Parallel Products 

8 V. JOHN WHITE 

Sierra Club 
9 

10 

11 

12 



TOM MARKIN, Director of California Governmental 

Organizations 

ARCO 

EVELYN GIBSON 

California Independent Oil Marketers Association 



13 LYNNE EDGERTON, Member 

State Air Resources Board 

-: 

VICTORIA JONES 

15 Southern California Gas 

16 GORIK HOSSEPIAN 
Allied Signal Aerospace 



SPENCER FLOURNOY, Member 

California Regional Water Quality Control Board 

North Coastal Region 



IV 



1 

2 

3 

4 

5 

6 

7 

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10 

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12 

13 

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15 

16 

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21 

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INDEX 

Page 
Proceedings 1 

Governor ' s Appointees : 

DONALD J. VALPREDO, Member 

California Horse Racing Board . . 1 

Statement in Support by SENATOR KEN MADDY 1 

Background and Experience 2 

Questions by SENATOR AYALA re: 

Use of Illegal Drugs in Horseracing Industry ... 2 

Position on Satellite Wagering 3 

Questions by CHAIRMAN LOCKYER re: 

Controversy Last Year regarding Use of 

Clenbuterol and Decision of Executive Secretary . 3 

Statement by CHAIRMAN LOCKYER of Committee ' s 

Intention regarding All Appointees 4 

JACQUELINE E. SCHAFER, Chairperson 

State Air Resources Board 5 

Background and Experience 5 

Questions by CHAIRMAN LOCKYER re: 

State Actions in Response to the 

Federal Implementation Plan 8 

Deadline for State's Response to 

Federal Implementation Plan 10 

Anticipated Response to Federal 

Implementation Plan 12 

Meeting Emissions Standard by Use of 

Alternative Methods 13 

Differences in State's Initiatives and 

Enforcement Activities and those Contemplated 

in the Federal Implementation Plan 15 

Suggested Alternative to Shipping Emissions ... 16 



INDEX I Continued ^ 

Questions by SENATOR AYALA re: 

Proposals by Mayor Riordan of Los Angeles 

re: Pollution Controls in San Bernardino and 

Riverside Counties 17 

ARB's Participation in Riordan Plan 18 

Study on Economic Impact of Mayor's Proposal ... 19 

Questions by CHAIRMAN LOCKYER re: 

Possible Controversy over Reformulated 

Gasoline Regulation 20 

Extra Cost to Consumers 22 

Contemplation of Actions to Reward or 

Penalize Refiners 22 

Luncheon Recess 23 

Afternoon Proceedings 24 

Questions by CHAIRMAN LOCKYER re: 

Confrontation rather than Collaboration 

with Federal Efforts 24 

Refusal to Participate in Workshops, etc 27 

Witnesses in Support: 

CARL PERRY, President and Chief Executive Officer 

U.S. Electricar International . 27 

JOHN TORRENS 

PG&E 30 

JIM GREENE 

Southern California Gas Company 32 

CECILE MARTIN, Deputy Director 

California Electric Transportation Coalition 32 

MICHAEL THOMAS 

California Trucking Association 33 

TOMMY ROSS 

Southern California Edison 33 



VI 



INDEX ( Continued ^ 

CINDY TUCK 

California Council for Environmental and 

Economic Balance 

California Grape and Tree Fruit League 34 

JOHN KENNEDY, Director 

Advanced Applications 

Allied Signal Aerospace 34 

BILL NORTHRUP, Executive Vice President 

Independent Oil Producers Agency 35 

Questions by CHAIRMAN LOCKYER re: 

ARB ' s Involvement in Cal-EPA Joining in 

Lawsuit Challenging Federal Regulations on 

Fuel Additives 36 

View on Mayor Riordan's Proposals 38 

Questions by SENATOR AYALA re: 

Lack of Enforcement of Smoke Emission 

Truck Standards 40 

Health Risk Posed by Truck Emissions 42 

Lack of Even-Handedness in Treatment of 

Trucks vs. Passenger Vehicles 43 

Questions by CHAIRMAN LOCKYER re: 

Domination of Economic Analysis over Health 

and Safety Focus at ARB 44 

Accumulation and Centralization of Power 

with Current Administration 45 

Lack of Substantive Results 46 

Response by SENATOR CRAVEN 46 

Witnesses in Opposition: 

RICHARD VIND, Chair and Chief Executive Officer 

Regent International 48 

Participation in Lawsuit with Oil Companies ... 49 

Preliminary Draft Submitted to Oil Companies ... 49 



Vll 



INDEX (Continued^ 

ARB's Refusal to Comply with Public Records 

Act Request 50 

Response by MS. SCHAFER 54 

NEIL KOCHLER, Partner 

Parallel Products ... 56 

ARB's Misleading Remarks about Ethanol 

Blends in Gasoline 57 

Lack of Promised Fuel Neutrality 58 

Questions by SENATOR CRAVEN re: 

Misunderstanding Nominee's Remarks 59 

JOHN WHITE 

Sierra Club 63 

Lack of Performance 63 

Lack of Independence 65 

Questions by SENATOR CRAVEN re: 

Technical Expertise at Sierra Club 66 

Questions by SENATOR PETRIS re: 

Major Change of Direction in Policy 

at ARB 67 

Witnesses in Support: 

TOM MARKIN, Director 

California Governmental Organizations 

ARCO 69 

Questions by SENATOR AYALA re: 

Letting Marketplace Determine which 

Additive Should be Used 71 

Possible Health Risks 71 

Statements by SENATOR PETRIS re: 

Industry's Comments on Marketplace 72 

Industry's Consistent Denial of 

Health Risks 7 3 



Vlll 



INDEX ( Continued ^ 

Questions by SENATOR PETRIS re: 

Only Report from ARB on Use of Alternatives 
related to Use in Summer Months 75 

EVELYN GIBSON 

California Independent Oil Marketers Associatoin ... 75 

Questions by SENATOR PETRIS re: 

Pesticides Source of Volatile Organic 

Compounds 76 

Independent Monitoring of Most Hazardous 

Pesticides 7 8 

Which Department's Scientists Are 

Responsible for Monitoring Pesticide Emissions . . 80 

Responsibilities of ARB and Department of 

Pesticide Regulation and Local Districts 81 

Safeguards against Political Intervention .... 82 
Questions by CHAIRMAN LOCKYER re: 

ARB's Action on VOCs from Pesticide Emissions . . 83 
Questions by SENATOR PETRIS re: 

Ultimate Control over Pesticide Emissions .... 84 

Regulated Industry in Strong Support of 

Nomination 85 

Statement by CHAIRMAN LOCKYER re: 

Holding Confirmation under Submission 86 

Plans to Take Testimony from Out of Town Nominees 

and Witnesses 86 

LYNNE T. EDGERTON, Member 

State Air Resources Board 88 

Background and Experience 88 

Questions by SENATOR AYALA re: 

Mayor Riordan ' s Proposal 91 



IX 



INDEX (Continued) 

Witnesses in Support; 

TOMMY ROSS 

Southern California Edison 92 

VICTORIA JONES 

Southern California Gas 93 

CECILE MARTIN 

California Electric Transportation Coalition 93 

GORIK HOSSEPIAN 

Allied Signal Aerospace 93 

Motion to Confirm 94 

Committee Action 95 

SPENCER FLOURNOY, Member 

California Regional Water Quality Control Board 

North Coast Region 95 

Background and Experience 95 

Questions by SENATOR AYALA re: 

Experience as an Engineer 96 

Competence in Water Quality Problems 96 

Major Water Quality Issue Facing California ... 97 

Need to Address Delta Issue 98 

Statements by SENATOR CRAVEN re: 

Schools Attended by Nominee 98 

Questions by CHAIRMAN LOCKYER re: 

Supervisor Carpenter's Negative Comments 100 

Signs in Meeting Room 102 

Questions by SENATOR AYALA re: 

Geographical Extent of District Served 103 



INDEX (Continued) 

Questions by CHAIRMAN LOCKYER re: 

Appropriateness of Appointment for Water 

Quality Slot on Board . . . 103 

Motion to Confirm 104 

Committee Action 105 

Termination of Proceedings 105 

Certificate of Reporter 106 



P-R-O-C-E-E-D-I-N-G-S 
--00O00 — 

CHAIRMAN LOCKYER: Senator Maddy, you wanted to take 
up what is item number seven for us ; under appointees , number 
two. 

SENATOR MADDY: Mr. Valpredo, yes, Mr. Chairman and 
Members . 

Mr. Valpredo has served a term on the California 
Horse Racing Board a long time. He's a personal friend of mine 
as well as an avid person involved in horseracing as a breeder 
and owner, one of the few on the Horse Racing Board today that 
is and has been involved in all aspects of the industry. He's 
past chairman of the California Thoroughbred Breeders 
Association. 

I think he ' s demonstrated the four years that I have 
observed his actions on the Horse Racing Board as being 
extremely objective, one trying to do reforms where reform is 
needed, and has been, I think, in all respects by all persons 
who observed from all aspects of the industry an excellent Board 
member . 

So, I would ask that you strongly consider the fact 
of confirming him at this point. 

CHAIRMAN LOCKYER: Thank you. 

Mr. Valpredo, if you'll push the button there in 
front of you. You might want to start with any general 
comments, if you would. 

MR. VALPREDO: Good morning, Mr. Chairman, Members of 
the Committee. 



I'm Donald Valpredo, resident of Bakersfield, 
i California. I'm in the farming business. My family has been 
involved in racing and raising thoroughbred horses longer than I 
can remember. 

I have, as Senator Maddy said, served for 23 years as 
a director of the California Thoroughbred Breeders Association. 
I'm a member of other thoroughbred organizations in the state 
and also nationally, a member of the Jockey Club. 

I have served for four years now on the California 
Horse Racing Board. I'm currently Vice Chairman of that Board, 
and have served on various committees . 

I ' d be very happy to answer any questions you may 
have. 

CHAIRMAN LOCKYER: Well, let me ask if there are 
questions yet from Members . Senator Ayala . 

SENATOR AYALA: First of all, Mr. Valpredo, I'm not 
an expert on horseracing, but I keep reading about the illegal 
use of drugs as it pertains to horses. 

What problem does the racing industry have with 
illegal drugs on horses? 

MR. VALPREDO: Well, Senator, I don't think we're any 
different than any other sporting event. There's always the 
potential for the use of illegal drugs. 

We monitor that very closely. We have constant 
surveillance of the drug testing of winners and other horses 
that are — other competing horses in the races . We do that 
randomly . 

We have been -- I think California's in the forefront 



of leading that issue, and we have become a role model for other 
states. I'm very proud of the record that California has. 

SENATOR AYALA: It's not out of control. It's there, 
but you think you've got it pretty well under control? 



MR. VALPREDO: Yes, sir. 



SENATOR AYALA: Do you favor the issue of satellite 
wagering? 

MR. VALPREDO: I currently serve on the Racing 
Board's committee, and that's a very tough issue. We are 
monitoring what the revenues by satellite wagering, how they 
return revenues to the state, to the associations, and to the 
horsemen . 

Satellite wagering seems to be coming — the way that 
this industry is going. Yes, I favor satellite wagering, but it 
has to be monitored very closely. 

SENATOR AYALA: That's all I have for now, 
Mr. Chairman. 

CHAIRMAN LOCKYER: Thank you, Senator. 

Well, I guess, going back to be a bit more specific, 
there was the controversy last year regarding several horses, 
and the suggestion that Clenbuterol had been used. And I guess 
the executive secretary made a decision to dismiss the matter, 
which according to the subsequent Attorney General ' s report and 
investigation, numerous Board members thought that the secretary 
had acted inappropriately. 

Can you help us understand what the dispute was 
about, and what you own views are about the matter? 

MR. VALPREDO: Yes, Senator. 



That dispute was handled improperly from that fact 
that when there's any sort of a positive test that comes back, 
there's a split sample. The split samples were sent off without 
the proper notification of the trainers and owners of the — of 
those animals. So, their chance for due process was then 
negated because those split samples were used. 

It was poorly handled, and those are some of the 
things that we've corrected. 

CHAIRMAN LOCKYER: Who was in error? Who made the 
mistake in the way they — 

MR. VALPREDO: Well, the procedural error came down 
from the then-acting executive director. 

CHAIRMAN LOCKYER: And that is with respect to the 
samples, or with respect to the investigation, or decision to 
not investigate? 

MR. VALPREDO: Well, the procedural error of 
mishandling of the split samples led to the complete 
investigation that could have taken place. 

CHAIRMAN LOCKYER: So, that wiped it out, in effect? 

MR. VALPREDO: Yes, sir. 

CHAIRMAN LOCKYER: Are there other questions? 

What I've recommended to Members, just so you'll be 
aware, is that we take testimony today on all of the various 
appointees, take them under submission. Probably some we'll 
take up before the Legislature adjourns for the year; others 
don't need to be acted on until December or later, so we'll have 
plenty of time to return to the issues. 

Is there anyone present that wishes to make any 



comment on the nomination of Mr. Valpredo? 

I think that's all we want to hear at this point. 
Thank you, sir, for your willingness to visit with us. 

MR. VALPREDO: Thank you, Mr. Chairman, Members of 
the Committee. 

[Thereupon the Senate Rules 
Committee acted upon legislative 
agenda items . ] 

CHAIRMAN LOCKYER: Jacqueline Schafer. 

My thought about the schedule is, we probably have 
sufficient time to do one, break, and then come back at 1:30. 
So, in terms of managing your time, if anyone is present, I 
would recommend, unless you have an interest in — 

SENATOR AYALA: Mr. Chairman, is it your wish that we 
just hear the appointees, and not take action on them today? 

CHAIRMAN LOCKYER: Yes, that would be my thought for 
today, is that we just take testimony. We ask for comment, and 
take the matters under submission until later in the week. 

SENATOR AYALA: At some later day just for a vote 
only. 

CHAIRMAN LOCKYER: Probably, unless there's some new 
startling information we learn. I would think that would make 
sense, yes. 

All right. 

MS. SCHAFER: Thank you very much, Mr. Chairman and 
distinguished Members of the Senate Rules Committee. 

I'm honored to be here today as Governor Wilson's 
nominee to Chair the California Air Resources Board. 



I'd like to begin by reviewing for you briefly my 
prior experience in environmental policy and management for your 
consideration, and then move on to some of the goals that I have 
at the Air Resources Board. 

My career reflects broad experience with 
environmental issues relating to: federal environmental 
legislation; military base closure and clean up, including 
installations here in California; and administration of 
environmental regulations as a Regional Administrator for the 
U.S. Environmental Protection Agency. As Chairwoman-designee, I 
have sought to foster the excellent technical and scientific 
work that has been the tradition of the Air Resources Board, 
while applying the lessons I've learned throughout my career on 
managing the controversial issues that the ARB has faced in the 
months since the Governor appointed me to the Board. 

For example, the Board recently reviewed its 1990 
mandate for the commercial development of zero-emission vehicles 
and the implementation of reformulated gasoline, all with the 

19 intent of addressing some of the greatest air quality challenges 

20 in the nation. 

21 Prior to joining the Air Resources Board, I was 
appointed to be the first Assistant Secretary for the Navy for 
Installations and Environment, where I was responsible for 

24 J policy and oversight for Navy and Marine Corps installations, 
environmental protection and restoration, safety and 
occupational health, and shore resources management. 

I'm very proud of my work at the Pentagon, which 
' included establishing an alternative fuels program for 



22 
23 



Department of the Navy fleet vehicles. As a result of this, the 
Navy's Public Works Center in San Diego opened the military's 
largest natural gas refueling station in the world last year. 

This experience with the Navy and Marine Corps has 
already proved to be valuable in my current assignment as Chair 
of the Air Resources Board. For example, this year we've 
sponsored an effort jointly with Assemblymen Cannella and 
McPherson that will preserve air quality credits at military 
bases so that California can get on with its finding prosperous 
re-uses for its closing military facilities. 

Previously, I have served on the White House Council 
on Environmental Quality from 1984 to 1989. This is a 
three-member advisory panel that was established by the National 
Environmental Policy Act to draft guidelines to carry out the 
Act, and to produce the President's annual Environmental Policy 
Report to the Congress . 

Prior to that, I served as the U.S. EPA Regional 
Administrator for Region II. In that position I was responsible 
for implementing federal environmental regulatory and grant 
assistance programs in the states of New York, New Jersey, 
Puerto Rico and the Virgin Islands. I also worked for a total 
of 11 years as a staffer with the United States Senate, 
including six years as a professional staff member to the U.S. 
Senate Committee on Environment and Public Works. During that 
time, I worked extensively on environmental issues, including 
the Clean Air Act and the Clean Water Act. 

Part of my role as Chair of the Air Resources Board 
is to make sure we don't lose touch with the regulated 



8 

community, both industry and individuals. We need not only to 
encourage the most forward-looking technology to control air 
pollution, but also to understand their practical impacts on 
those who are affected by our regulations. To make great 
strides environmentally, as we have in the past, we must help to 
rebuild California's economy so that it can support industry in 
making the investments in innovative environmental technology 
for which our state is already so well noted. 

In closing, I'd like to say that I have a strong 
appreciation of the relationship between a healthy environment 
and a sound economy. We have a lot of work to do in both areas, 
and we can only do it by recognizing that environmental and 
economic goals must work in tandem. The status quo isn't going 
to clean up the air. We also need to harness market forces to 
achieve our goals in the future, and we are beginning to explore 
effective ways to accomplish this. 

California has set high standards for itself and has 
been bold in leading the nation in environmental improvement . I 
am committed to continuing that tradition. 

I appreciate the attention of the Committee this 
morning. 

CHAIRMAN LOCKYER: Thank you very much. Thank you 
for your introduction. 

I'd like to have you comment for a moment on the FIP, 
and what actions you would anticipate from the state in response 
to the deadlines that are running. 

MS. SCHAFER: The FIP is the Federal Implementation 
Plan. It is a leftover requirement from the 1987 — the 1977, 



excuse me, Clean Air Act. 

When the 1990 Act amendments were adopted by the 
Congress, there was some expectation that the FIP requirement — 
that is, the federal intervention in planning in California — 
would be removed. However, under a court order in the Ninth 
Circuit in San Francisco, the interpretation was that EPA had to 
proceed with the FIP. EPA really did not want to do that, but 
under court order agreed to a deadline of February 14, 1994 to 
prepare the Federal Implementation Plan, and that would become 
final in February, 1995. 

At the same time, the Federal Clean Air Act requires 
California, as it does all other states which have areas that 
are not in full attainment with the air quality standards, to 
prepare a State Implementation Plan. Unfortunately, having to 
proceed with two plans simultaneously, both of which are 
intended to achieve very aggressive emission reductions, has 
required duplication of effort and created some confusion among 
our regulated community. 

What the state is trying to do, and what we have done 
in the past, is to make sure that we have the strongest, most 
forward-looking, technology forcing programs on the books that 
i will allow us to reduce emission in a cost effective manner. 

It ' s important to note that underlying the federal 
rules are their rule that the State of California has adopted 
over many years: our low emission or zero emission vehicle 
program, and our reformulated gasoline program. 

EPA's comment period ends on August 21. We have, for 
our part, been developing, through a series of symposia, 



10 

innovative and alternative control technologies that we might 
also include in our State Implementation Plan, which must be 
submitted to EPA later this year. We are working prodigiously 
with the local districts, because our planning process in 
California builds from the bottom-up. The local districts 
develop plans , and we have been working in cooperation with them 
to develop emissions inventories, modeling information, and they 
will take the first step in proposing the local air quality 
management plans for us to review. We will continue to be 
engaged in this process between now and the end of the year. It 
is highest priority at the California Air Resources Board, to 
complete our State Implementation Plan in a timely manner, and 
make a presentation to EPA that will satisfy the requirements of 
federal law. 

CHAIRMAN LOCKYER: You mean by a week from Wednesday? 

MS. SCHAFER: No. The deadline for the State 
Implementation Plan is November 15, and there is an 18-month 
period after that to make additional demonstrations . 

CHAIRMAN LOCKYER: With respect to the FIP 
requirement, the feds' comment period ends at the end of the 
month? 

MS. SCHAFER: Yes, the federal comment period before 
the plan they introduced in February. 

CHAIRMAN LOCKYER: Are you contemplating some — 

MS. SCHAFER: We will be making comments on the 
federal plan; however, our first responsibility, and EPA has 
acknowledged this as well, is for us to move ahead in an 
expeditious manner to develop the State Implementation Plan, 



11 

because the expectation is that the state plan is the one that 
will prevail at the end of the day. 

CHAIRMAN LOCKYER: It certainly will if you get it 
done. 

MS. SCHAFER: Absolutely, and if we do it right. 
That's very important also. 

CHAIRMAN LOCKYER: So, it would be your thought that 
it's unnecessary to respond in this cycle to FIP defects? 

MS. SCHAFER: We would expect — 

CHAIRMAN LOCKYER: That is, you have until the end of 
the month to comment on the FIP. We're not doing that? 

MS. SCHAFER: We will be commenting on it. However, 
the notion of coming up with a state plan is one that we have 
several more months for, and we are working very hard with the 
local districts to do that. Our goal is — 

CHAIRMAN LOCKYER: In February? 

MS. SCHAFER: The statutory deadline is November 15, 
plus there is a period of 18 months after that to make 
additional demonstrations of completeness, and things like that. 

CHAIRMAN LOCKYER: But so far, there is no state 
response or critique of the FIP? 

MS. SCHAFER: The concentration that I have been 
making is to develop a State Implementation Plan. 

Keep in mind that the federal plan has as its basis, 
as its foundation, emissions reductions that are the result of 
the California regulatory program, and has been for many, many 
years . These are additional measures that the EPA has proposed 
in order to reach attainment . 



12 

We are developing regulations. We are working with 
the community that is to be regulated from the bottom-up to come 
up with things that are practical for California and that will 
lead to genuine reductions in emissions in the areas that are 
not yet in attainment. 

CHAIRMAN LOCKYER: I'm sorry, but that seemed to be a 
nonanswer . 

I'm trying to understand, is there a response 
anticipated by the end of the month to defects in the FIP? 

MS. SCHAFER: We will have comments on the FIP. We 
will point out where we think that the FIP is impractical for 
implementation in California. 

But the constructive response that we are expected to 
make under the Clean Air Act is to develop our own State 
Implementation Plan, which is due at the end of this year. 

CHAIRMAN LOCKYER: Right, and can you anticipate what 
the criticisms will be? I assume there'll be some written 
communication that will go to the federal government, pointing 
out defects in the FIP? 

MS. SCHAFER: Let me give you some examples. 

The Federal Implementation Plan addresses sources 
that have not been traditionally as heavily controlled as other 
sources . We have done an enormous amount in light duty 
vehicles, for example, and the fuels that are used in those 
emissions. We have done — in those vehicles. We have done an 
enormous amount for stationary sources in California. 

There are some sources that we are — it would be a 
stretch to achieve technologically, but we are working with the 



13 

regulated community to find out exactly, and with engine 
manufacturers, to find out exactly what would work best. 

Right now, EPA's Federal Implementation Plan suggests 
that a standard of 1.5 grams of NOx per brake horse power hour 
is beyond is the capability of the technology to achieve in the 
time frame required. It would require alternative fuels, such 
as natural gas, to accomplish, and it would exclude the use of 
diesel fuel in heavy duty engines and in off-road applications 
such as construction and farm equipment. 

We ' re very concerned that it ' s not practical . And 
one of the reasons we're concerned is that if the users of those 
engines do not meet the standards in the time that EPA requires, 
a penalty will be imposed, a fee will be imposed, and that would 
add up their cost of doing business, will put them at a 
competitive disadvantage with other states , and will not help 
California's economic recovery. In fact, it will probably end 
it sooner than later. 

What we're looking at with the engine manufacturing 
organizations is how well we can do using diesel in our — in 
the machinery that we need to use in California, where we have 
the infrastructure and the ability to service these engines. 
And we expect that we will be establishing a range of 
regulations, and we'll be working with the U.S. EPA, since they 
have considerable authority under the Clean Air Act, which is, 
the states are pre-empted from adopting regulations that will 
meet these standards through a federal mandate . 

We expect that we should be able to continue to use 
diesel-powered engines here in California, even though they will 



2 



14 

be cleaner than anyone has ever attempted to make them before. 
It's a stretch. It is technology forcing; however, we think we 
can do it, working with the industry and the regulated 
community. 

CHAIRMAN LOCKYER: It's your view that the emissions 
standard expected to be met can be obtained in alternative ways? 

MS. SCHAFER: We certainly have a big job in 
California, both the FIP and the SIP both have to achieve 
enormous reductions in emissions in order to meet the federally 
mandated deadlines. There's no question about that. 

The question is how we go about doing that, and I 
think that the Air Board has a long tradition of pushing, 
mandating technology that is practical to achieve but that 
really pushes beyond the edge of what we have been able to 
accomplish easily in the past. We intend to continue that 
focus, and I think that we will be successful in demonstrating 
our ability to attain the national standards in the time frame 
required. 

CHAIRMAN LOCKYER: How would you sketch the likely 
means to obtain, meet, those standards? 

MS. SCHAFER: As I mentioned, the imposition of 
technology forcing regulations in sectors where we have not 
heretofore regulated. 

CHAIRMAN LOCKYER: What would those be? 

MS. SCHAFER: And that would be far-reaching N0 X 
controls for heavy-duty engines, both on-road and off -road 
construction and off -road farm sources, for example. 

We certainly expect that our low emission and zero 



15 

emission vehicle program will be successfully implemented over 
the years, and that this will bring about the reductions in 
emissions that we also expect. 

And finally, in-use habits of people. We'd like to 
see much more turnover of older vehicles, get them off the road 
in connection with the smog check program that this Legislature 
worked with the Governor earlier this year to enact improvements 
in. 

We think the combination of better controls over 
sources that have not historically been controlled, better 
controls over those which we have the best standards in the 
world for in terms fuels and engines, and in-use controls that 
will help us to make sure that we accelerate the introduction of 
the newest technologies into the fleets and continue on the 
downward slope that we have historically enjoyed here as a 
result of our clean fuels program, clean fuels and clean cars 
program . 

CHAIRMAN LOCKYER: How would you think the 
initiatives and enforcement activities that you've described are 
different than those contemplated by the FIP? 

MS. SCHAFER: As I mentioned before, the FIP is 
largely founded on a punitive program of emission fees. The 
standards are set for a variety of categories which are 
difficult to meet with any certainty in the time frame required. 
If those are not met, a series of fees is imposed on the 
industries, and we're afraid that that will merely have the 
effect of having people hang on to older equipment for a longer 
period of time, or, if they can operate outside of California, 



16 

we're afraid that they may move operations outside the state in 
order to escape standards which are imposed on California 
sources and not on other national sources with which they 
compete. 

An example is the $10,000 a ton emission charge for 
NOx on shipping that ' s brought in from Los Angeles and Long 
Beach Ports. That would certainly make it difficult for those 
people to continue in business at those locations, and they 
would, presumably, move to other ports, either to our north or 
south. 

CHAIRMAN LOCKYER: I happen to agree, but what would 
be your alternative to, let's just say, shipping emissions that 
somehow is superior to the fee or more likely to cause changes 
of behavior? 

MS. SCHAFER: We would like to see EPA adopt national 
standards where they have that authority so that all of these 
sources are treated equally, and that we would work with the 
local governments in adopting operational controls and 
requirements so that we will minimize the emissions while they 
were in the ports and areas that would adversely affect the air 
quality of the people in Southern California. 

CHAIRMAN LOCKYER: Let me mention, and your staff may 
have already researched this, but Pasco, the steel manufacturing 
facility on the Carquinez Straits, was required by the Bay Area 
Air District to reduce NO emissions rather substantially in 
order to dock in the Bay Area. 

They found that things, like, they've retrofitted the 
ships, but separate from that, which was expensive, separate 



17 

from that, they've found that most of the problem comes from 
running the engines while they're at dock because they don't 
have alternative power sources, and on-pier electrical 
generation and so on seemed to be the solution that worked. 
That seems to be an easy one to do in L.A. to avoid a lot of the 
* fines and difficulties . 

MS. SCHAFER: Going cold iron, as they say, with 
military ships is done, and of course, that actually saves 
money, too, so that there are alternatives. 

And our job is to work with the regulated community 
and the local districts to find out the most practical solutions 
and include those in our State Implementation Plan. And I think 
we'll be successful in doing that. 

CHAIRMAN LOCKYER: Senator Ayala. 

SENATOR AYALA: I have a question or two. 

Ms. Schafer, are you aware of the proposals made by 
the Los Angeles Mayor, Richard Riordan, to replace the pollution 
controls in urban Los Angeles with new controls in the inland 
areas, such as controls on dairy farms and dust from farming and 
construction? Are you aware of that proposal? 

MS. SCHAFER: I'm aware that the City of Los Angeles 
has an alternative which was presented to the local air quality 
management board in Southern California last week. As a result 
of his presentation, and testimony of other people, it's clear 
that the South Coast wants to take another look at its own 
regulations . 

With respect to the question that you're raising, I 
have the same answer as I did for the Chairman. There are some 



18 

proposals and some plans that are just not practical, and — 

SENATOR AYALA: And that's one of them. 

MS. SCHAFER: An aspect of the Los Angeles plan, 
although there are probably a number of good features to the 
plan as they propose it, there are aspects which are 
impractical. And we have dedicated some of the best people, top 
staffers, at the Air Resources Board to work with the South 
Coast Air Quality Management District and the City of Los 
Angeles over the period of the next month to work out a local 
plan which is soundly based scientifically, which meets the EPA 
requirements for submittal in the fall, and which also is the 
most cost effective and practical way of getting the emissions 
and reductions that we need to do. 

SENATOR AYALA: Did the ARB participate in the 
development of the Mayor's proposal? 

MS. SCHAFER: No, we had not done that, but we intend 
to participate with the South Coast in their review of the 
Mayor's proposal, as well as the review of their own proposal. 
And we hope that that will lead to a stronger plan coming to the 
Air Resources Board for our review in another month. 

SENATOR AYALA: But you haven't taken a position on 
the new proposal by the Mayor as yet? 

MS . SCHAFER : No , we have not ; however , we've made 
our staff available to work with them. 

SENATOR AYALA: It's interesting that you mentioned 
Riverside and San Bernardino Counties to add more controls 
there, and listed the ones in urban Los Angeles, it's 
interesting because those two counties, Riverside and San 



6 



10 
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12 



19 

1 Bernardino, 75 percent of the pollution's intrusion from Orange 

2 and L.A. Counties. 

3 Now, that's a fine solution for the Mayor to say: 

4 Hey, with less regulation, but let's stick it to the other 
counties . 

I'm sure we're not going to hold still for that, I 
can tell you that. 

8 MS. SCHAFER: I believe in order to achieve some of 

9 the Mayor's objectives, the kind of controls that are being 
suggested have alternatives and may not be necessary. 

As I said, we don't want to adopt impractical 
solutions, and the ones that you're referring to, such as 

13 controls over dairy farm operations, do not sound practical to 

14 us or necessary. 

15 SENATOR AYALA: Has a study been made yet on the 

16 proposal to see what the economic interests in those areas, with 

17 more regulations, would pose, and what would be economic impact 

18 on those two counties that the Mayor would like to throw his 

19 pollution to? 

20 MS. SCHAFER: I believe that the first meeting of the 

21 groups that's taking a look at the Mayor's proposal was last 

22 Friday. They have a lot of tasks that need to be accomplished 
this week before they meet again. I'm sure that they're looking 
at whether or not the specifics in the proposal are cost 
effective, and that will be part of our consideration. 

SENATOR AYALA: Thank you very much. 

27 MS. SCHAFER: Thank you, Senator. 

28 CHAIRMAN LOCKYER: We had some considerable grief 



24 
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1 last year with respect to diesel fuel requirements and 



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implementation and enforcement. 

Is something similar brewing with respect to 
reformulated gasoline? 

MS. SCHAFER: As the Committee knows, the Board 
adopted its reformulated gasoline regulation, which is the 
strictest set of rules for controlling emissions from gasoline 
in the world. It is a very major commitment by the refining 
industry in this state. About $5 billion worth of capitol 
construction is required in order to make this fuel by our 

deadline of March 1, 1996. 

i 1 

12 In order to ensure that the regulation which was 

13 adopted will be implemented smoothly, the Air Resources Board 

14 created an advisory committee on reformulated gasoline, and this 
committee has a number of subcommittees, the principle efforts 
of which are going to be to be certain that we have the 
quantities of the reformulated gasoline available to us so that 
there are no supply shortages that would have an artificial 
impact on price when this fuel is introduced in 1996. 

The second is, and this is a lesson learned from our 
21 I diesel experience which we don't want to repeat, the second 

ij committee is looking at a testing program to make sure that the 
reformulated gasolines are — when they're put into the vehicles 
in California, not just the new vehicles but the myriad 
different engines that are in the existing vehicles throughout 
the state, perform properly. We don't want to have any 
performance problems as a result of using the reformulated 
gasoline. 



I 21 

I 

1 And finally, we need to have an outreach program to 

explain to the public why we have this new fuel, what its 

3 benefits are, and just as an instrument for making sure that the 

4 program is implemented well. 

5 One of the things that I've discovered since I've 

6 come to the Board is that if there ever was a time when merely 
voting on a rule was the end of a day for us, that day is over. 

8 We have got to continue to work with the regulated community on 

9 implementing each and every one of these regulations , and that 

10 is a major part of the Air Resources Board's workload, and I 

11 think it will be in the future for every one of these 

12 regulations. It's the successful introduction of the fuel, or 

13 the new technology into our economy that we need to be just as 

14 j much a part of as we were a part of establishing the rule 

15 j itself. 

i 

;l 

16 CHAIRMAN LOCKYER: I think I heard you say we're not 

17 going to re-experience the same difficulties? 

18 i MS. SCHAFER: We certainly are taking every 

il 

19 jl precaution to avoid the supply disruption and the performance 

20 problems and the misunderstandings that were part of the 

21 introduction of the diesel fuel. 

22 The diesel rule is a very effective rule in reducing 
emissions, and we're happy that we can depend on that in terms 
of meeting our standards in California and being able to comply 

25 Federal Implementation Plan. 

We also have high hopes for the reformulated gasoline 
rule, and we think that in the early years, most of our emission 
reductions will come from the implementation of that regulation. 



24 



28 



22 

CHAIRMAN LOCKYER: Do you have any sense of how much 
extra it's going to cost consumers? 

MS. SCHAFER: The estimate at the time the Air Board 
adopted that rule was 12-17 cents a gallon to make. Now, the 
market, of course, is run by supply and demand, and the world 
price of oil may make it difficult to pass on those costs. 

There are some refiners who have testified, for 
example, before Mr. Katz ' s committee in the Assembly, that they 
believe they could make this fuel for about 8 cents a gallon. 
That really depends on the make-up of the refinery itself, how 
old it is, what equipment they already have there. 

As I said, they are putting into the ground currently 
about $5 billion in capitol costs, which will have to be 
recovered, and also the cost of making this gasoline is going to 
be much more complicated and therefore more costly. 

One of the things that we did earlier this year was 
to adopt a model which the refiners could use, a predictive 
model it's called, to allow them to use more than one 
formulation to meet the properties that we established for this 
fuel. We hope that by using that model, they will be able to 
begin to work to reduce the cost of producing this gasoline when 
it is introduced. 

CHAIRMAN LOCKYER: Finally on this topic, do you 
contemplate any additional actions to either reward or penalize 
refiners that comply in a timely way with your requirements? 

MS. SCHAFER: The rule that we have, I recall, 
includes opportunities for waivers which would have an economic 
penalty associated with them if they were required, but those 



23 

are generally implemented at the staff level. 

We expect that — and certainly what the refiners are 
telling us is that although it may be a tough deadline to meet, 
that many of them are well on their way to meeting that 
deadline, and that most of them expect to be making this kind of 
gasoline in California in 1996. 

CHAIRMAN LOCKYER: Ms. Schafer, I'd like to 
interrupt, come back at about 1:30, if that's convenient for 
you, to take additional testimony. 

MS. SCHAFER: Certainly, Mr. Chairman. I'll be happy 



to 



CHAIRMAN LOCKYER: Thank you. 
We'll recess until 1:30 p.m. 
[Thereupon the luncheon recess was taken.] 

— ooOoo — 



24 

AFTERNOON PROCEEDINGS 
— ooOoo — 

CHAIRMAN LOCKYER: I guess we're ready to resume. 

I apologize for the fact that we keep sandwiching our 
meetings in between other things that are happening 
simultaneously. It's that time of year when we all feel a 
little like the Ring Master with nine rings all going 
simultaneously. Hopefully, the elephants aren't loose. 

I don't mean the partisan elephants, or the donkeys; 
neither one. 

We left off essentially focused on the FIP and the 
SIP, and what we might anticipate in that department. 

I guess the concern I was trying to express is that 
there seems to be a pattern in a variety of policy and 
administrative areas, but a pattern of the administration not 
wanting to collaborate with the federal policy makers and 
administrators, but rather to kind of point fingers and blame 
others for whatever is going on. 

This seems to be one of those circumstances, that 
there ■ s been several months that we ' ve had an opportunity to 
respond and comment; it hasn't occurred. There were workshops 
that the feds sponsored; we, I guess, haven't participated. The 
Clean Air Coalition and L.A. Chamber and others that had 
negotiations ongoing with the federal EPA invited the ARB to 
participate; they declined. 

The comments by Mr. Strock, at least, calling the 
Vice President names and so on, seem to suggest an attitude of 
confrontation rather than collaboration. 



25 

So, I guess those are the concerns that I was trying 
to get at, and maybe I was too subtle or indirect in the way I 

3 approached the matter. 

4 I assume I could probably write your, "Oh, no, we're 

5 working hard and together," response, but what do you think 

6 about all of that? 

7 MS. SCHAFER: Mr. Chairman, when the Congress wrote 

8 the Clean Air Act of 1970, and in all the amendments since then, 

9 one of the overriding principles behind that statute was that 
the federal government would set the standards and leave it to 



10 



11 the states to carry out the laws as they saw fit. 



12 



Because of the nature of the air quality problem in 



13 California, a very, very difficult problem, probably ten times 

14 | worse than the next worse case, which happens to be New York, 

i' 

15 j| where I came from previously, we have established in this state 

16 a record that is the envy of the country and of the world in 

17 | advancing technology to clean up the air. And we're very proud 

ii 

18 ; of that record that we have developed. We think that we are 

19 showing the way. 

20 And if you look at the Federal Implementation Plan 

21 that was proposed, you'll find that much of it is based on the 
California strategy. 

23 What is unfortunate, through a court reading of a 

24 pre- 19 90 Clean Air Act version, the 1977 version, EPA has been 
asked to come in and try to substitute its judgment for that of 
Californians. When they do so, if you look at the actual 



22 



25 
26 



27 specific additional measures that they proposed, they are 



28 



damaging to California in many ways, and they will not address 



26 

the air quality problem that we have. It's clear that the FIP 
has got some problems that are going to cost us a lot from an 
economic point of view, and because they are unattainable as a 
technical matter, will not result in air quality improvement. 

As a consequence, our strategy has been to take EPA 
at its word, which is, if we develop a good State Implementation 
Plan, they will in fact defer to California as — in the final 
analysis. And rather than to try to figure out whether we can 
make a plan that is based on fees and punitive measures work, we 
decided to work from a bottom-up perspective with the regulated 
community and with the air quality districts in the state to 
produce a State Implementation Plan which we believe will be 
fully substitutable for the federal plan. 

I don't know whether you want to characterize that as 
confrontational or not. I think it's constructive. It allows 
us to focus on what I believe the Congress intended, which was 
for the states to take the lead in carrying out the statute. 

It ' s a formula that ' s worked very well for us in the 
past. This is the first time that such a Federal Implementation 
Plan has been written that just didn't work out very well for 
us. So, we'd like to see them set that aside, allow us to use 
the State Plan as the basis for demonstrating attainment, and 
move forward on that basis. 

And I believe that comments that have been made by 
federal officials are that they will certainly bow to the state 
when our plan is due and it meets their expectations . 

CHAIRMAN LOCKYER: I've heard the same thing, and I 
fully agree that there are major defects in the federal plan. 



27 

So, it makes sense to try to promulgate a state-sensitive 
alternative. 

What I don't understand is refusing to participate in 
the EPA workshops, not responding to the problems, the perceived 
problems, with their plan for six months, not participating in 
negotiations with the L.A. Chamber and others, and a lot of 
name-calling. 

Those are the acts that suggest to me that the theme 
this year is the Governor runs against Bill Clinton, which I 
guess is fine, but as one of his administrators responsible for 
policy setting and administration of a very important program, 
I'm disappointed that it gets to your level. 

MS. SCHAFER: Mr. Chairman, I have met with the L.A. 
Chamber, and in fact, our staff has talked to EPA and to the 
local air districts, and have worked with them. We provide most 
of the modeling, and inventory analysis on which all of these 
plans are based. 

In the end, though, what we will be held accountable 
for, and what EPA has told us we would be held accountable for, 
is putting together a good State Implementation Plan. And 
; that's where I've focused my effort consistently since my 
appointment. 

CHAIRMAN LOCKYER: Let's ask if there are people who 
would wish to comment, either in support of or in opposition or 
raise concerns, whichever you might characterize your views. 

Let me start with supporters, maybe, if there are any 
of those. 

MR. PERRY: Good afternoon, sir. My name is Carl 



2U 

i 
Perry. I'm the President and Chief Executive Officer of U.S. 

Electricar International, which is based in Santa Rosa, 

California. 

Mr. Chairman, Members of the Committee, thank you for 
the opportunity to testify today in support of several 
outstanding individuals, unquestionably qualified for 
confirmation to serve as members of the California Air Resources 
Board . 

Under the capable leadership of Chairman Jacqueline 
Schafer and her colleague, Lynne Edgerton, the Air Resources 
Board is leading the effort to bring California the tremendous 
health, environmental and economic benefits of cleaner air. 

As President of the California-based U.S. Electricar, 
and I believe, sir, that we are the largest full line 
manufacturer of electric vehicles in the United States and 
possibly the world, I'm here today as proof that the vision, 
leadership and demonstration shown by Chairman Schafer and 
members of the Board are beginning to pay tangible dividends to 
our state. 

The Air Resources Board's support of clean fuel 
vehicles has created a positive business climate and allowed 
advanced transportation companies, like U.S. Electricar, to 
raise millions of dollars of private capitol, form strategic 
partnerships with companies worldwide, and most importantly, 
employ hundreds of Calif ornians. Many of those people on our 
payroll are displaced defense and aerospace workers and 
economically disadvantaged residents of the riot-torn part of 
downtown Los Angeles . 



29 

If I might say, sir, that we have capacity -- the 
question has been asked: well, with these mandates and where 
we're going with CARB, is the technology there? Are the 
vehicles there? Is the market there? 

My company's a small company, but we have facilities 
in Los Angeles, Redlands, California. We are, in a sense, in 
partnership with General Motors; we buy our drive systems from 
General Motors-Hughes. We buy our cars from — really they're 
Geo Prisms and the Chevrolet XlOs that we convert. 

CHAIRMAN LOCKYER: Keep buying those Geo Prisms. 
They're from Fremont. 

MR. PERRY: Yes. We're going to buy 2,000 of them 
this year, sir. 

We have the capacity to build over 4,000 vehicles 
this year. This is at the time some parts of the automotive 
industry say the market isn't there. We've raised a tremendous 
amount of money ourselves; it's private capitol . We have no 
real federal money or any other money like that. It's our own 
19 |j capitol. So, I'm saying that the market is here. We're 
building. 

CARB has created this atmosphere. They have stood 
firm. They have stayed the course. They have fought against 
people who said, "Well, the time is not now, the technology is 
not now. The technology and the vehicles cannot be made and the 
market is not now. " 

And I would just like to say as a California company 
who started with 20 employees last August, who has 300 employees 
as we speak, will have close to 900 by the end of our fiscal 



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i year which will be next July, we'd like to refute those 

i 

| statements because we think we're a living, breathing proof that 

I it can be done in California, and it does work, and the 

technology is here. 

We're also putting a facility in New York State, 
along with Governor Cuomo. We are part of NAFTA in building 
vehicles to help Mexico City. We're also working in Canada. 
We're exporting our technology, and we are building our vehicles 
from California to export to Japan. 

So, in summary, I would say, sir, that it's critical 
that the members before you, both Jacqueline Schafer and Lynne 
Edgerton, before you today are confirmed so that our Resources 
Board can continue to promote the policies and programs to 
protect public health and stimulate the development of 
environmental technologies and advanced transportation in our 
state, and in the industries concomitant with that. 

The continued leadership of the Air Resources Board 
will allow California to maintain the lead in the global race to 
develop new environmental and transportation industries . We're 
proud to be a part of it. 

Thank you very much. 

CHAIRMAN LOCKYER: Thank you, Mr. Perry. 

MR. TORRENS: Mr. Chairman, Members, I'm John 
Torrens, represent PG&E. 

When Chairwoman Sharpless left the ARB, we had three 
major initiatives going with the Air Resources Board, and we 
were somewhat concerned that the impetus, the money, and the 
staff leadership that had been experienced to date would somehow 



31 
1 '. be lost when Chairwoman Schafer came. So, we met with her, and 



2 



we expressed our concerns over the San Joaquin Valley air study, 



3 !: which is a $17 million modeling study that will be the state of 



4 

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the art air quality modeling study ever done in the world; the 
NO x retrofit program, a $250 million program where all of our 
existing fossil-fired power plants are being equipped with state 
of the art N0 X control devices; and finally, our clean air 
vehicle program which emphasized the use of natural gas and 
electric powered vehicles. 

The San Joaquin Valley air study is now producing 
results the likes of which have never been seen by science 
before. We know where the pollution is coming from, where it's 
going, and how it's interacting with the weather and the air in 



14 j California. 

15 |, The NO retrofit program is out to bid. Construction 

i x 

16 I in some of our power plants is underway, and soon our NO 



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21 



emissions from our major fossil units will be reduced by 90 
percent, and on a schedule that is fair to our shareholders and 
ratepayers . 

And you cannot go out and cross L Street today, right 
now, without seeing a natural gas bus drive by. And you'll see 



23 
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i natural gas cars and buses just about everywhere you go in 



California, followed soon, we believe, by electric. 

So what I'm trying to point out to you in support of 
Chairwoman Schafer is that the initiatives that were started as 
far as our company is concerned have been not only carried out, 
some cases finished up, and in a timely way, and in a way that 
has been economic for us and our ratepayers . 



i 32 

We would encourage you to recommend confirmation of 
Chairwoman Schafer. Thank you. 

CHAIRMAN LOCKYER: Thank you. 

MR. GREENE: Mr. Chairman, Members, I'm Jim Greene, 
representing Southern California Gas Company. 

Since the Chairwoman's appointment, we've had a 
chance to work with her and observe her work. We have been very 
impressed with both her technical skills and her leadership 
abilities, particularly in the low emission vehicle area, which 
is of concern to us, and we would urge her confirmation. 

Thank you. 

CHAIRMAN LOCKYER: Thank you. 

MS. MARTIN: Mr. Chairman and Members, I'm Cecile 
Martin. I'm the Deputy Director of the California Electric 
Transportation Coalition, and I'm speaking today on behalf of 
our founding members' and state's major electric, and electric 
and gas utilities, both investor owned and municipal. 

We're here to support Ms. Schafer 's confirmation as 
Chairwoman of the California Air Resources Board. We and our 
members have found Ms . Schafer to be informed and attentive to 
California's air quality challenges. She's been a strong 
supporter of California's low emission vehicle program, and we 
have applauded Ms. Schafer 's particular interest and sensitivity 
to the economic development and export potential of California's 
nascent advanced transportation technology industry. 

We urge you an aye vote on her confirmation. Thank 
you. 

CHAIRMAN LOCKYER: Thank you. 
i 



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MR. THOMAS: Mr. Chairman, Members of this Committee, 
my name is Michael Thomas. I am from the California Trucking 
Association. 

I am here today to cast an aye vote and ask for your 
confirmation for Ms. Schafer to the Air Resources Board. CTA 
has spent thousands of man hours investigating the FIP. We have 
attended virtually all hearings. 

I am here to tell you today that I was present at the 
South Coast AQMD hearings two weeks ago. ARB was there, and ARB 
was named to the special committee appointed by the chairman 
down there to investigate their plan. So, ARB is participating. 

I am also here to tell you that the CTA and ARB were 
together at a symposium in Huntington Beach two weeks ago where 
we introduced numerous alternative plans that could be 
instituted in a state SIP. 

I am also here to answer any question that you may 
have concerning the Federal Implementation Plan and its results 
with California. 

Thank you. 

CHAIRMAN LOCKYER: Thank you, sir. 

MR. ROSS: Mr. Chairman and Members, my name is Tommy 
Ross on behalf of Southern California Edison. 

We agree with the statements by the previous 
witnesses. We also strongly support Ms. Schafer' s appointment 
as Chair of the Air Resources Board and encourage you to vote 
for that nomination. 

One brief statement that I'd like to make is that 
contrary to characterizing her tenure as being confrontational, 



34 

from our perspective we've found her to exercise very 
substantial leadership skills. We've found her approach to be 
balanced, fair, and we found her to be very approachable. 

We again encourage you to vote in favor of her 
appointment . 

CHAIRMAN LOCKYER: Thank you. 

MS. TUCK: Thank you, Chairman Lockyer and Members. 
Cindy Tuck today on behalf of two organizations. First is 
CCEEB, the California Council for Environmental and Economic 
Balance, and also the California Grape and Tree Fruit League. 

Both of these organizations support the confirmation 
of Ms. Schafer. We urge your aye vote. 

Thank you. 

CHAIRMAN LOCKYER: Thank you. 

MR. KENNEDY: Good afternoon, Chairman and Members of 
the Committee. 

My name is John Kennedy. I'm the Director of 
Advanced Applications for Allied Signal Aerospace, a large 
California aerospace company. We are currently involved with 
several programs on fuel cell development and hybrid vehicle 
development . 

I've submitted a letter for the record in support of 
this nomination, but I'd like to make some comments. And I 
think several things come out to me. 

One is, Jacqueline has a superb record of achievement 
in environmental matters over her career. I think everybody 
should keep that in mind, that she has been an achiever in that 
field. 



35 

;| 
1 I think several of the other speakers have already 

pointed out the most important thing to us, and that is the 

3 leadership issue here, because I really think that what we need 

4 as we go forward is leadership, even more than in the past. I 

5 also think it's been noted by several people that she has a very 

6 clear view of the interaction of economic and environmental 

7 concerns, and recognizes that they do not have to be 

8 confrontation, that there are solutions that consider both and 

9 are constructive on both fronts. 

10 And I'd like to emphasize especially the impact of 

11 far-sighted leadership at CARB in the future, because as we go 

12 into the 21st Century, with environmentally friendly and energy 

13 efficient technologies, California needs to retool its great 

14 economic base in high tech to generate those technologies, and 

15 generate the jobs, and generate sustainable growth with a better 

16 environment. 

i 

17 We urge confirmation. Thank you. 

18 MR. NORTHROP: Mr. Chairman and Members, my name is 

19 Bill Northrup. I'm Executive Vice President of the Independent 

20 oil Producers Agency. 

We submitted a letter for the record. I shan't 
repeat all the laudatory things that have been said about 

23 Ms. Schafer. 

24 We urge your approval . 

25 CHAIRMAN LOCKYER: Thank you. 

Is there other support present? 
Perhaps I could interrupt any opposition comment 

simply to ask a couple of additional questions, partly because 



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36 

I'm anticipating there'll be some issues raised during other 
comment . 

I guess the Air Resources Board has indicated that 
you are fuel neutral as to clean air issues. It is at least 
claimed that representations have been made that whatever the 
federal policy is, we would work to implement that federal 
mandate or direction. 

That seems to be contradicted by Cal-EPA using your 
studies and data in joining the lawsuit challenging the federal 
reg. on fuel additives. 

I guess I'd like to draw you out on the issue of 
ARB's involvement in that issue, or your own thoughts about 
whether that was a wise or unwise decision for Cal-EPA to make? 

MS. SCHAFER: The California Air Resources Board did 
submit an affidavit in a lawsuit, objecting to the 
implementation of EPA ' s renewable oxygenate rule . EPA ' s rule 
was finalized at the end of June. However, in February of this 
year, and this position that we have taken at ARB is a position 
that we have been consistent in for the last 20 years or so, 
we've commented on the rule when it was still a proposal. 

The problem that we have with EPA ' s rule is that it 
specifies a fixed percent of ethanol or its derivatives, 
renewable oxygenates, as an additive to gasoline. And what we 
discovered in that rule extensively as a result of the oil 
embargo of the mid-70 's, that adding these alcohol fuels 
actually increased their volatility and created a problem in 
terms of air quality. 

So, our concern has been, as we've developed our 



J 7 

regulations over the years and improved on those to the point to 
where we're adopting a reformulated gasoline standard effective 
on March of 1996, that we have the best fuel possible, and the 
most flexible operating characteristics possible, so that our 
refiners can meet the standards, get the maximum benefit from 
this, as I mentioned earlier, $5 billion worth of capitol 
investment that we are putting in in California. 

The EPA regulation makes it more difficult to do 
that, because it requires a particular fixed percentage of 
ethanol or ethanol derivative. In one extreme in Southern 
California — and this rule, the EPA rules only apply in Los 
Angles and San Diego — that we could be penalized as much as 20 
tons a day for using ethanol. 

The alternative derivative would, in fact, increase 
our cost significantly, and we discussed that earlier. We'd 
already estimated increasing the cost of gasoline as the result 
of our reformulation, and we'd like to be able to have 
incentives that would allow the industry to drive the cost of 
production down and not up. One of the problems is that EPA's 
rule will increase the costs in California. 

So, what we'd like to do is to keep fuel neutral. 
Any fuel that can meet the specifications that we've identified 
in our regulation is one that ' s acceptable to us . EPA did not 
allow us that flexibility, so we objected to it and also made 
our views known to the court, which is considering a motion to 
stay the implementation of those regulations. 

CHAIRMAN LOCKYER: So that anxiety about the science 
and the volatility standards was, in your view, what prompted 



38 

the lawsuit? 

MS. SCHAFER: Well, for California's participation, 
our objection to EPA's renewable oxygenate rule is based on a 
i history that we have had since 1971, when we adopted regulations 
limiting the RVP measure of volatility. We have a very strict 
set of parameters with our new reformulated gasoline, including 
a very low RVP number for controlling the characteristics of 
these fuels. 

We believe that EPA's rule interferes with our 
ability to achieve those goals in terms of emission reductions, 
and we feel that we should have objected to that, and we did 
that. 

We have — the Legislature has considered waivers 
from our RVP rule over the years, but most recently they added a 
condition specifying — I think this was last year — that 
ethanol blends must comply with the comprehensive standard that 
ARB establishes for reformulated rules. 

Again, we believe that our way is the best way for us 
in California to proceed, and that EPA introduced an artificial 
requirement that would make it more difficult for us to achieve 
the air quality standards and would make it more expensive. 

CHAIRMAN LOCKYER: Let me move on to ask about Mayor 
Riordan's proposals that regulatory activity in the Los Angeles 
area ought to be reduced or suspended because of job impacts, 
and he's recommended that San Bernardino and Riverside Counties 
be involved to a greater extent in ammonia reduction at dairies, 
or other efforts, that would help meet the goals. 

Do you have a view about those recommendations? Have 



39 

you spent time analyzing them? 

MS. SCHAFER: No. As I explained to Senator Ayala, 
his plan has surfaced only recently at the South Coast Air 
Management hearing on August the 12th. As a result of his 
introducing alternatives, the South Coast, which is developing 
their portion of the plan that becomes part of the State 
Implementation Plan, decided to take a good look at the plan 
that the Mayor proposed. 

Our concern is to make sure that the modeling that ' s 
done in the South Coast plan is correctly applied, and we think 
that they're both using good models, which really depends on who 
you — what kind of assumptions you put in. 

The issue here is that you can achieve the air 
quality that we require in Southern California to demonstrate 
attainment by having various levels of control over volatile 
organic compounds and oxides of nitrogen. These can be — there 
are tradeoffs among them. And so, if you plot these on a curve, 
you can pick any place on the curve to get those kinds of 
emission reductions, so you have to make a decision, a policy 
decision, which the South Coast is involved in making, of what's 
the optimal trade-off of those control strategies to get to the 
attainment demonstration. That's the kind of technical 
discussion that's going on right now and will proceed for the 
next month. 

The specific proposals that are in the Los Angeles 
plan I have not personally reviewed, but if Southern 
California's South Coast Air Quality Management District 
includes some of those in their plan to us, we will review it at 



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the state level when it comes to us . 

Our role now is to have staff participation to make 
sure that they have the best science, the best modeling, and the 
most practical set of assumptions going in, but as I indicated 
to Senator Ayala, we certainly have no intention of passing 
along as part of the state plan something that is impractical 
and suboptimal in terms of the control strategy. 

CHAIRMAN LOCKYER: Senator Ayala. 

SENATOR AYALA: I have a couple other questions I'd 
like to put before you. 

It ' s been brought to my attention that it appears as 
if the ARB is no longer enforcing the heavy vehicle smog 
inspection program, that no citations have been issued to 



14 violators of the smoke emission truck standards. 



Do you know if that's correct or not? 

MS. SCHAFER: Prior to my joining the Board, prior to 

17 my appointment, the Air Resources Board did shift resources, 

18 staff resources, from enforcement of the heavy duty standards — 

19 heavy duty truck smoke regulation, over to working on other 

20 aspects of our diesel fuel regulations. And in the interim, 

21 it's our understanding, and I believe the Legislature has 



supported this , that we need to take another look at how we ' re 
going about actually taking that test. 

We are working with the institutions, professional 
institutions, that actually developed good test procedures to 
use, and until our confidence is increased that the test that we 
are running is the best test for doing that, we probably will 
not be doing any additional checks against the old standard. 



41 

-■ 

The old standard was the best available at the time, 



but the suggestion that we've had from all concerned is that 
there is a better standard that we should be aiming towards , and 

4 we expect to have that better standard available to us later 

5 jj this year, in which case we will again address the enforcement 

6 of heavy duty smoke. 
But it was resource issue, the decision that was made 

prior to my taking office. In the meantime, technical questions 
have been raised, and we're working towards coming up with the 
best test that will be the most consistent in fairness in terms 
of stopping these trucks on the roadside and — 

SENATOR AYALA: Currently, the truck smoke emissions 
inspection program is no longer in operation; is that what 



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14 || you're saying? 



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MS. SCHAFER: It's been suspended pending the 



16 identification of a better test and a more consistent and 



17 I' dependable test to do that. 

■ 

18 SENATOR AYALA: It's kind of unfair for the regular 

19 passengers that have to stand inspections, smog inspections, of 

20 their cars before they're issued a new license and so forth, and 
let the trucks, who are emitting heavy-duty smoke, just get away 
with it. 

MS. SCHAFER: The snap idle test, as this is called, 
is not the only enforcement tool that we have available to us . 
Fleets that operate trucks in California are expected to have a 
program in place to do self -inspections and to make sure that 
their — the engines in their vehicles are performing properly. 

It is not exactly like the test that we have for 



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passenger cars, but it's one that we think is effective. 

This additional so-called snap idle test is one that 
we have depended on, but some technical problems have arisen, 
and until we resolve those, we would prefer not to put a 
procedure in place that is not one that we have a lot of 
confidence in. 

SENATOR AYALA: You and I discussed the health risk 
at great length the other day. 

What risk does allowing loading trucks to operate on 
California highways pose to public health? 

MS. SCHAFER: One of the issues that was raised with 
our reformulated diesel fuel was to try to reduce the health 
consequences of those emissions, the exhaust emissions. As a 
consequence, just with the reformulated diesel fuel, we will 

15 reduce emissions about — that are of concern from a toxic point 

16 of view, about 25 percent. So, we're going a long way towards 

17 reducing any health exposure from these trucks just by that rule 

18 alone, because you put that reformulated diesel fuel into all 
!9 the trucks that are buying gas in California. 

20 As I mentioned earlier in testimony, we expect that a 

major part of our future program for demonstration of attainment 
that we have to make later this year will be to establish new 
standards to make sure that as trucks are introduced into the 
fleet, that they are the cleanest trucks possible. 

SENATOR AYALA: Doesn't a flagrant violation of the 
truck emission standards erode public support for efforts to 
clean the air that may inconvenience the regular motorists, such 
as the smog check program? Why should we be lenient on trucks , 



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1 ! who are really polluting heavily, and be very strict with 



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everyone that drives a car? It doesn't make sense to me, why 
you ■ re doing that . 

MS. SCHAFER: We want fairness not only between the 
operators of trucks and operators of passenger vehicles, that is 
part of our program. We also want fairness among operators of 
truck fleets, and there are some outstanding truck fleet 
operators who are trying to do the right thing. It doesn't do 
them any favors, and it doesn't increase their confidence, if 
there are other members of the trucking organizations that don't 
meet those standards . 

So, even-handed enforcement policy is, in fact, 
underlying our approach to this throughout. 

14 , SENATOR AYALA: Until they start realizing that they 

15 I! are going to be citing some of these polluting trucks, I can 

16 ij understand why the trucking association supports you, because 

17 they're getting away right now with something they shouldn't. 

18 MS. SCHAFER: I don't think that's true. As I said 

19 before, we have standards. They are in place, and the fleets 

20 must observe them. And we have ways of reviewing, from an 

21 enforcement point of view, whether or not they're doing a good 
job. 

This one tool is a tool that we would like to be able 
to use, but we want to use with with greater confidence than we 
have now, and we need to have the new standard, the SI standard, 
finalized before we reinstitute it. 

But we do have an enforcement program. It is 
designed to keep an even-handed enforcement policy with respect 



10 

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44 

i 
I 

1 to cars and trucks, and among the truck fleets themselves. 

2 SENATOR AYALA: Thank you. 

i 

3 MS. SCHAFER: Thank you, Senator. 

4 CHAIRMAN LOCKYER: Well, I think Senator Ayala, 

5 perhaps, has highlighted one area. Senator Petris ' s staff shows 

6 me others; perhaps he'll want to comment on the others. 

7 It appears that economic analysis rather than health 

8 and safety focus dominates in CARB. I guess that's somewhat a 

9 subjective evaluation, but as I read the correspondence, it's 
always an economic emphasis on the letters that are written and 
testimony provided, and so on. 

12 That's not to say that we shouldn't be sensitive to 

13 our state's economy because, obviously, we have to be. But 

14 there's a certain tone about it. Maybe it is reflected in your 

15 j| own training as an economist, but I just note that the areas of 

16 ii diesel emissions, the ethanol issue, and others, seem to reflect 

li 

17 that administration's concern about economic matters rather than 

18 clean air. 

In my mind, that is violative of your fundamental 

mission statement, and you don't have to respond. 

21 MS. SCHAFER: Mr. Chairman, if I may, I would like 

22 to , however . 

23 CHAIRMAN LOCKYER: Yes. 

24 MS. SCHAFER: It's been my experience, after working 
in this field for over 25 years, that the only way that we can 
reach our environmental goals, and I subscribe fully to the 



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environmental goals that we have established here in California 



28 



and under the federal statutes that we also must operate, the 



45 

way we can do that is to make sure that we have a strong, 
healthy and growing economy. That is the way we can afford to 
put into place the new technologies that we need to achieve the 
emission reductions that we all need. 

As I said in my opening statement, I believe that 
these can work in tandem. I think we've heard from Mr. Perry 
that in fact they have worked to help to stimulate new economic 
activity in the environmental technology field, and I think that 
is something that we can look forward to. That will help all 
Californians clean up the air as well as enjoy the benefits of a 
prosperous, free society. 

CHAIRMAN LOCKYER: Well, okay. I guess by way of 
response, I'd point out, first of all, that the initiatives 
referred to are ones begun in the previous administration. 
Mostly what I have seen during the current administration is an 
emphasis on accumulating power, and centralizing, and bringing 
more and more power into the hands of upper level bureaucrats . 

And when you ask about substantive results, it's all 
a work in progress: well, we're working on a new regulation; 
we're working on a new system; we're working on a new model; 
we're thinking about responding or complying. It's all a work 

j 

in progress. 

It ' s very hard to evaluate the work product of this 
administration, other than to say that there seems to be a 
preoccupation with getting a grip on more and more power, and 
that's it. There's very little sense of what they want to do 
with the power once they get it. 

SENATOR CRAVEN: May I, Mr. Chairman. 



46 

1 CHAIRMAN LOCKYER: Senator Craven. 

2 SENATOR CRAVEN: What are you talking about? I don't 
I 

3 I understand that at all. 

4 CHAIRMAN LOCKYER: Well, with respect to the issues 
before us, we hear again and again: well, yes, we've had six 
months to respond to the federal requirement. We're still 
thinking of doing that between August 22nd and August 31st. 

8 Then, we're working with the South Coast and others 

to propose a State Implementation Plan. I assume that there's a 
lot of work involved in evaluating and responding to those local 
suggestions as they trickle up, but that has to be done a couple 
months from now, two and a half months. 

And it's always a work in progress. I never see, you 
know, somebody creates controversy, so she gets fired. Somebody 

15 else initiates, and they get pushed aside while we think about 

16 it some more. 

So, what I've seen is an administration preoccupied, 

and I think it is endemic to the captain of the ship. That's 
where it starts from, that there's an administration preoccupied 
by getting more and more power clutched into its bosom. 

SENATOR CRAVEN: I have to disagree with you on that. 

22 CHAIRMAN LOCKYER: I respect the disagreement. I'm 

23 ! telling you what my observations are. Nothing comes out of it 

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It's just a lot of get power, and think about things, and then 
nothing ever happens. It's frustrating. 

SENATOR CRAVEN: May I respond, Mr. Chairman? 



27 CHAIRMAN LOCKYER: Certainly 



28 



SENATOR CRAVEN: I think there is a preoccupation, 



47 

but I think that preoccupation is channeled definitely toward a 
technological improvement on what we have done heretofore. And 



3 !i when they take time — you've mentioned that, and I would agree, 



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it takes time, obviously, and I'm sure that you agree with that. 

You deal with Los Angeles, one of the great cities in 
the world, to try to take care of their problem; San Diego, one 
of the other larger cities, that has to be worked on as it 
applies to both of those areas, and that must be implemented 
into the plan of the entire state. 

Now, I've heard a lot of people come in here and 
testify in many, many years. I've never heard anyone who I 
think in any way could show more expertise than this lady has 
shown. And I think you would have to be almost deaf not to feel 
that she knows exactly what she's doing. She can refer to what 
they have done, and I'm sure that she is big enough to say if 
they have not succeeded. I don't recall that she really has 
said that, but that was something that happened before her. 

But to me, she has shown, I think the get-up and go 
that we need. But, Mr. Chairman, I don't feel that anything 
that she does, she assumes because of might that she or her 



21 organization was just to be powerful. 



She must serve someone well, because in the blue 
sheets here are the people who have chosen to comment, 17 of 
them endorsed her completely, and one did not. 

Now, I'm not say that that necessarily makes them 
right, but ordinarily when you have that kind of a relationship 
with the public, and they seem to return a feeling or an 
opinion, I have to be impressed with that. 



4 8 

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1 CHAIRMAN LOCKYER: Well, I respect your analysis. 

2 SENATOR CRAVEN: Thank you, Mr. Chairman. 

3 CHAIRMAN LOCKYER: Maybe we could ask if there are 

4 any opposition. There might be a couple of them. they might 

5 come forward, who ever wishes to comment. 

6 MR. VIND: Mr. Chairman, my name is Richard Vind. 
I'm Chair and Chief Executive Officer of Regent International. 

8 We are in the ethanol business in California, and have been 

9 since 1979. 

10 I am disappointed to have to appear here today 

11 before you on behalf of the ethanol producers to raise serious 

12 concerns about the leadership of Ms. Schafer at the Air 

13 Resources Board. 

14 When she was first appointed, our industry was asked 

15 by our Governor to meet with her in order to confirm her fuel 

!; 

16 neutrality. And he asked us to enlist our support in order to 

• 7 confirm her in the Senate here. 

1 
• 8 During that meeting, we asked Ms. Schafer what her 

i 
,9 ;, agency would do if the federal EPA passed an ethanol mandate as 

part of its renewable oxygenate requirement. She responded that 

if California was not exempted, as she expected, she would work 

closely with our industry in its implementation. 

You could imagine my concern, therefore, when after 

the EPA's ethanol mandate was adopted, that California EPA 

Secretary, James Strock, cited CARB data in an affidavit to the 

U.S. Court of Appeals attacking the renewable oxygenate 

requirement by declaring ethanol to be a dirty fuel . 



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28 It occurred to me that the reason for this action 



i: 49 

1 ji might lie in the fact the only other party in the lawsuit is the 
ji 
major oil companies who are adamantly opposed to expanding the 

f use of ethanol. The unholy alliance between big oil and the 

agency expected to protect California's environment was 

partially confirmed by Secretary Strode' s outrageous attack on 

the Vice President of the United States for his key vote in the 

Senate, ratifying the renewable oxygenate program. In a 

blatantly politically motivated attack, Secretary Strock called 

Vice President Gore "a pathetic spectacle" for his action on the 

EPA initiative, the same agency which Ms. Schafer used to work 

for. 

Not until last Friday, though, did I observe 

irrefutable proof that the attack on ethanol is political 

pay-back for the concern the major oil companies have about the 



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15 jj reformulated gas rule, which Ms. Schafer says, repeatedly has 



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i said today, will cost the major oil companies $5 billion. I 
don't dispute that. 

Thanks to the California Public Records Act, which 
this body passed some years ago, I have obtained documents that 
clearly show that senior staff at the California Air Resources 
21 Board submitted a preliminary draft of Mr. Strock* s affidavit to 
ji the oil industry for comments and changes three days before the 
document was officially submitted to the Federal Court of 
Appeals . This smoking gun memo is not listed among the 
documents that were turned over to me, which my lawyers tell me 
that this practice is a violation of the Bagley-Keene Open 
Meeting Act, which prohibits private communications by state 
agency officials regarding policy rule implementation. 



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1 CHAIRMAN LOCKYER: We have these documents that have 

been supplied to us that maybe you could help us interpret. 

3 MR. VIND: That's fine, Mr. Chairman. I'm almost 

4 finished here. 

5 I did want to point out, it should be noted that the 

6 same preliminary draft that the fine folks at Texaco were 
privileged to receive was refused to me when I requested it 

8 under the California Public Records Act request of August 11. 

9 In fact, it was said that this was not the public interest to 
disclose it to me, but it was given to Texaco and Chevron one 
day — two days prior to Secretary Strock filing this with the 

12 Federal Court. 

13 My questions for Ms. Schafer: were you aware of 
that unholy alliance between your top staff and the oil 
industry? And if you were not, why, as chief executive of this 

16 important board, were you not aware of such critical policy 

17 action by your senior staff? And finally, if confirmed, would 

18 it continue to be your practice or the practice of your agency 

19 to allow major oil companies to write the air quality policy for 

20 ! California? 

I 

21 Mr. Chairman, I refer you to the August 18 

22 j! memorandum. 

23 CHAIRMAN LOCKYER: Explain these documents to us, if 

24 you would. 

Have you seen these? Would you like a copy? 
MR. VIND: I have highlighted them, which might make 



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it easier for the Members to follow. 



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CHAIRMAN LOCKYER: I don't have highlighted ones, if 



51 

you want to distribute those. 

MR. VIND: If you'll notice, in the response dated 
August 18th by the California EPA to my lawyer, Mr. Andrew 
Bracker, this was in response to the August 11th California 
Public Records Act request for documents pertaining to the 
Cal-EPA's affidavit they filed in Federal Court to try to 
overturn the EPA ' s renewable oxygenate requirement . 

If you'll notice in paragraph two, it says: 
"Attachment A hereto lists all of the documents and records 
all of the documents. 

Paragraph three says : "... with the one exception 
noted below ..." Paragraph four cites the reason that they 
withheld this document. It says: 

"We are withholding a preliminary 

draft of the affidavit that was 

transmitted July 26, 1994. [They are] 

not required to be disclosed provided that 

the public interest in withholding the 

records clearly outweighs the public 

interest in disclosure. There is an 

important public interest in withholding 

such drafts so that the deliberative 

processes within the agency are not 

restrained. " 
This is the same draft that was sent on July 27th to Texaco and 
Chevron for comment. 

CHAIRMAN LOCKYER: How do we know that? 

MR. VIND: If you'll refer to the last two pages. 



10 



1 CHAIRMAN LOCKYER: So, you're saying two days be lore 

Mr. Strock joined the lawsuit, in effect joined it with the oil 

3 i refiners, that the affidavit that he would submit in joining 

4 into that lawsuit was circulated to the oil refiners but refused 

5 circulation to your — 

6 MR. VIND: It was never offered to us, yet when we 
asked for it after the fact, for the working documents, they 

8 claim privilege, that they could not give it to us because it 

9 was not a public document. 
Texaco finally did respond on July 27th, as noted, to 

11 Dean Simeroth on the Air Resources Board staff, with a copy to 

12 Al Jessel of Chevron Oil Company, with comments, three comments. 

13 And it says: 

14 "Dean: 

15 "I've reviewed the draft affidavit 

16 provided by Mike Kenny ..." 

17 who's with your Legal Affairs Department, 

18 "and I have a few comments." 

19 What is curiously missing from this is Chevron's letter, which 

20 we do not have, but we are filing today with the agency a demand 

21 that we receive all of the other documents that have been 

22 withheld from us . 

i 

23 This one, obviously, was given to us when they didn't 
want to do it. I'm sure this is the type of thing they would 



24 



25 rather have us not see. 



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CHAIRMAN LOCKYER: What was specifically refused? 



27 MR. VIND: The draft of the affidavit that James 



28 



Strock filed on behalf of the People of the State of California. 



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1 CHAIRMAN LOCKYER: That's this first document. 

2 MR. VIND: That's correct, which had been submitted 

3 to the oil companies, at least two, two days prior to filing 

4 with the Federal Court to overturn the renewable oxygenate 
program . 

6 CHAIRMAN LOCKYER: Have you been able to tell 

7 whether, when those documents were ricocheted between Cal-EPA 

8 and oil companies, whether there were any changes made? Are you 

9 able to tell that? 

•0 MR. VIND: No, sir, I could not tell at this time 

because I do not have the Chevron response which has been 
12 withheld form us. 
•3 CHAIRMAN LOCKYER: The Texaco comments? 

MR. VIND: The Texaco comments in part were 
| incorporated into the Strock affidavit, but again, Mr. Chairman, 
6 I do not have the draft affidavit, so I cannot compare. 

But clearly, it's designed to try to overturn the EPA 

18 ; ethanol requirement. 

19 CHAIRMAN LOCKYER: It's a little confusing; it's a 

2 little hard to follow all of the document trail. 

21 As I understand your point, you think that the agency 

22 collaborated with the oil refiners in a way that was adverse to 

23 your industry. 

MR. VIND: Clearly. 
CHAIRMAN LOCKYER: And refused to comply with Public 

Record requests which would have allowed you to learn that that 



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MR. VIND: Clearly, Mr. Chairman. 



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CHAIRMAN LOCKYER: Is ARB involved in this? 

MS. SCHAFER: The Air Resources Board staff did 
provide scientific information which was the basis for 
Mr. Strode' s affidavit. And I was aware that a Public Records 
Act request had been made, and my guidance to the staff was to 
provide all documents in a timely manner. I think a seven-day 
turnaround is pretty quick, if in fact those are the dates. 

MR. VIND: I agree. 

MS. SCHAFER: That were, within the law, required to 
be turned over, and that was a determination made by our 
counsel's office. I certainly support what they've done. 

Personally, I have not examined the documents that 
are all referred to here, but our intention was to comply with 
the Public Records Act request. We have nothing to hide. Our 
position is as I said it was. It's been a position that we've 
taken historically here. 

I'd like to point out one thing. We don't think 
ethanol is a dirty fuel. Ethanol is not a dirty fuel, and pure 
ethanol in an automobile, or pure ethanol in a stationary boiler 
would be a very good fuel . 

Our concern with ethanol is when it ' s blended with 
gasoline. Its volatility increases, and we have fuel — an 
emissions penalty associated with that. 

And I have met with Mr. Vind and representatives of 
his association, and we and Cal-EPA will work with them to 
create an ethanol-based industry in California for the proper 
applications of those fuels. 

However, as I say, the way EPA wrote the renewable 



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oxygenate rule, it penalized California from an air quality 
point of view, and we could not support it. And that's the 
technical information that was supplied in these documents. 
Apparently the one that has not been supplied was a draft, and 
I'm sure that that is quite proper, the way the staff handled 
that. 

CHAIRMAN LOCKYER: Mr. William Carter, I guess, is 
the attorney that seems to be involved. 

MS. SCHAFER: Assistant Secretary of Cal-EPA for Law 
Enforcement and Counsel. However, our staff attorneys and our 
technical staff reviewed Mr. Strock's — on behalf of Cal-EPA, 
reviewed Mr. Strock's affidavit in order to find it technically 
correct . 

MR. VIND: Mr. Chairman, you will note on the Cal-EPA 

response to me, to my lawyer — 

ji 

16 CHAIRMAN LOCKYER: I was noting that Cal-EPA lists 16 

17 documents that they providing pursuant to the Public Records 

i 
i, 

18 | Act, but apparently the documents from Texaco, which would have 

19 been in the file, were withheld. 

'i 

20 MR. VIND: That's correct. They were given to us, 

i 

21 ;! but not listed on the affidavit. 

CHAIRMAN LOCKYER: So, they're not listed, but maybe 

someone at the copying machine — 

MR. VIND: That's what I suspect. 

CHAIRMAN LOCKYER: Well, I'm not sure what to 
entirely make of that. 

Did you want to add anything else, Mr. Vind? 

MR. VIND: No, but Mr. Neil Kochler, I think, would 



56 

like to testify. 

CHAIRMAN LOCKYER: Please, sir. 

MR. KOCHLER: Thank you. Members of the Committee. 
My name is Neil Kochler. I'm a partner in Parallel Products. 
We are an ethanol producer in California. We convert waste 
products in the food and beverage industry in Southern 
California to ethanol and other value-added commodities. 

I'm also Director of California Renewable Fuels 
Council, which advocates on the behalf of not just ethanol, but 
other renewable liquid fuels in the state. 

To put some of this in perspective, we did meet with 
Ms. Schafer shortly after she took her position to discuss some 
of the issues relating to ethanol, and it's a very complex 
issue. I don't want to go into all the technical issues, but 
just to put it in some perspective, the Legislature for ten 

16 years has supported the use of not pure ethanol, but ethanol 

1 7 blends that Ms. Schafer claims are causing air quality problems 

18 in California. 



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The Legislature most recently passed SB 1166, I 
believe, two or three years ago, which put the volatility 
exemption in the context of a performance standard that said in 
that bill that unless it was shown that ethanol blends increased 
the ozone-forming potential or nitrous oxide emissions of 
ethanol blends relative to other fuels — unreformulated until 
'96, reformulated after '96 — that the Legislature wanted to 
continue to support the use of this fuel . 

No study since then has shown that we have an 
ozone- forming problem or NO problems that has been funded by 



57 

the Air Resources Board. In fact, the most recent study, a low 
oxygenate study that was just released, had a very limited data 
set, seems to suggest quite the contrary. That, contrary to the 
conventional wisdom, that ethanol blends at low levels do not 
increase N0 X , and that due to reactive benefits, it has not 
shown that there is an ozone problem. 

So, we feel very strongly that we are still complying 
with the intent of the Legislature to market our fuel in such a 
way that maintains not only the status quo, but offers a better 
environmental solution to the reformulation of gasoline in 
California. 

Because these issues are so critical, and there is an 
ongoing process to try to understand changing science, we met 
with Ms. Schafer to say we'd like to cooperate with you to do a 
modeling study that will try to put to rest some of these 
unresolved questions. We'll work with you to develop the 
protocols. We will all live by the results. 

There, in a letter to me, has been a commitment to 
cooperate with us in that study. 

So, you can imagine my extreme surprise and 
disappointment that — when that — that both CARB and Cal-EPA, 
while we thought we had the technical track to, in good faith, 
review the current science and to move towards the most 
environmentally beneficial use of our fuel, that suddenly, we're 
dirty, and that both CARB and Cal-EPA go on the record with 
extremely strong, misleading remarks about how our fuel will 
increase ozone, something that has not been shown. 

And I think Secretary Strock, his affidavit refers to 



58 

1 ! our fuel as causing irreparable harm to the health of California 
citizens. Well, I feel very strongly today that his remarks and 

3 the remarks of CARB are causing irreparable harm to the growth 

4 of our industry in this state. 

5 If we talk about economic growth opportunities, I 

6 know I applied the Chairwoman's desire to try to find the 
balance between economic development and environmental 

8 protection, and that also is why we're shocked that this 

9 position has been taken, because there aren't any new oil 

10 refineries being built in the State of California. 

11 We are at the cutting edge and at the brink of being 

12 able to convert a huge variety of primary end-waste products 

13 into ethanol in this state, and bring to this state tremendous 

14 new economic growth in jobs and industry. And that — it's very 

15 I difficult to strike a balance between economic development and 

16 environmental protection. We feel that we're the kind of 

17 industry that the State Air Resources Board should be throwing 

18 their arms around due to our ability to both provide clean air 

19 \ benefits and economic development. 

i 

20 So, we feel very strongly that we have not been dealt 

21 with in an even-handed manner. That while we are constantly 

22 being told that the state is fuel neutral, that given the 

23 comments that were made by the prior witness, and given this 
history that I've presented here, it sure feels that there is no 
fuel neutrality, and that, in effect, the oxygenate MTB produced 
by the oil companies seems to be the oxygenate of choice for the 



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Air Resources Board for reasons that we cannot understand. 



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I also feel that we are in a a strong fight between 



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1 | the major oil companies and the ethanol industry. The oil 

companies, major oil companies, for purely self-serving reasons, 
certainly reasons you cannot fault them for, do not want to see 
ethanol in their fuel because they do not produce it. 

Ethanol is more of a radical fuel in that it is a 
decentralized fuel, and it does not fit into the typical control 
structures of the major oil companies. So they, even though we 
represent a very minor portion of the fuel sold today, the oil 
companies have spent many millions of dollars and time trying to 
keep ethanol out of their fuel. 

It was extremely alarming to us to see California's 
environmental regulatory agency siding with the oil companies 
against our fuel . That does not seem to me to be fuel neutral . 

We do not question the qualifications of Ms. Schafer. 
1 If she were confirmed, we would continue to work with her, but 

16 |; somebody has to be accountable for the activities that have 

17 surrounded the very unorthodox opposition to this rule. 

18 This was an opportunity to bring our concerns public, 

19 and see if we can't find out what exactly is going on here. 

20 Thank you very much. 

CHAIRMAN LOCKYER: Thank you. 
Senator Craven. 

SENATOR CRAVEN: Thank you, Mr. Chairman. 
I enjoyed your remarks. They're very, very cogent, 

certainly, as was the gentleman who preceded you. 

I have a feeling that either you or I have 
misunderstood some of the comments made by this lady. I didn't 
get the impression that she was opposed to ethanol. As a matter 



60 

of fact, I recall when she said words to the effect that: we 
see nothing wrong with it, and it's good for this and good for 
that. 

I think that what she said at some other time, 
perhaps close to those remarks, was: the thing that we're 
concerned about is its volatility when combined with gasoline, 
which creates a problem from its burning, exploding, whatever. 

That's the way I recall that. Now, maybe I'm wrong 
on that, and if I am, you correct me. 

But she didn't give me the impression that they 
wanted to do away with it completely. I don't see how that they 
could maneuver, sub rosa or any other way, with the oil 
companies against your product . Wouldn ' t that be a conspiracy 
which could be, you know, challenged under the law, and a 
violation of the law? 

Now, tell me if I'm wrong in what I've said. I've 
been out where they produce ethanol. I know a little something, 
very little, but I do know something. 

MR. KOCHLER: My basic response would be that it is 
true that the Air Resources Board and the Energy Commission have 
supported the use of ethanol used pure in engines . There is no 
controversy as to the significant air quality benefits. 

There has been or there are controversies surrounding 
the low level use of ethanol in gasoline. There is a strong 
volatility increase when you use small amounts of ethanol. 

What is not stated anywhere in the public documents, 
either the testimony to the docket on the part of CARB to EPA 
commenting on the renewable requirement, or in Mr. Strock's 



61 



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affidavit, is that there are three or four other benefits in 
terms of reduced tail pipe emissions, lower reactivity, lower 
carbon monoxide, all of which when looked at as a whole, appear 
to at least reverse the increase in volatility, if not produce 
cleaner fuel than the alternative. 

That is why the Legislature, in their wisdom, passed 
SB 1166, which holds us to this performance standard. 

Granted, it gives us an exemption which we need to 
blend our fuel in gasoline to be commercially viable because the 
oil companies will not produce a tailor-made fuel out of 
ethanol . 

If it is shown that we do increase ozone, if we do 
increase N0 X , relative to the next fuel, then we lose our RVP 
exemption. The Board has not made that demonstration, so why 
would they then be going public, saying that we are increasing 
ozone in California? There's a discredit there between — 

SENATOR CRAVEN: You know, when you were stating the 
assets of the product, I'm willing to buy that. I have no 
problem with that at all. 

But one thing that I forgot to say was the fact that 
it was said that the use of ethanol in the gasoline situation 
not only has a volatility problem, if you will, but also that 
which it produced into the atmosphere was something that would 
cause the agency, if you will, to be fined by virtue of what it 
produces, so that they would have to really, if they chose to 
let it go, they would suffer by virtue of a penalty from a 
higher authority, presumably the feds. 

MR. KOCHLER: Well, if this is the fed rule, then the 



62 



1 fed went to great extents to ensure that the use of ethanol in 
the renewable rule would not cause such a problem. And all such 

3 provisions in the renewable requirement that went way far beyond 

4 what was needed to ensure — 

5 SENATOR CRAVEN: I think I've caught you on a day 

6 when you like the feds. However, I wonder if you always feel 
that way with the regulations under which you must live, which 

8 must be very onerous at times . 

9 MR. KOCHLER: Certainly. 

10 SENATOR CRAVEN: So, in other words, it's kind — 

11 MR. KOCHLER: We're just asking for a fair hearing. 

12 SENATOR CRAVEN: That's what you should have. 

13 jj MR. KOCHLER: We feel that through the politics of 

14 this particular issue, that a very promising new industry in 
! 

15 renewable resources in California has been unfairly treated. 
ii 

16 SENATOR CRAVEN: Have you spoken to Ms. Schafer about 

17 this? 

18 MR. KOCHLER: There have been — most of the — we've 

19 had two meetings with her. Most of the recent problems have 

20 been associated with statements from Cal-EPA. It's been 

i 

21 frustrating because we've approached people both at the 

22 California Air Resources Board and Cal-EPA, most of whom 

23 distance themselves from the remarks of Mr. Strock. It's been 

24 hard to find who really wrote the affidavit. 

25 That's been part of our frustration, because there 
were some statements that were made by Secretary Strock that, I 
feel very strongly, go far beyond what the technical analysis 
provided by CARB staff would support. 



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63 

1 SENATOR CRAVEN: I appreciate your candor and thank 

2 you very much. 

3 MR. KOCHLER: Thank you. 

4 SENATOR CRAVEN: I'll take the liberty of having you 

5 come up to testify in the absence of our Chairman, who probably 

6 will return very shortly. He's trying to work both sides of the 

7 street, running the House as well. 

8 Please state your name. 

9 MR. WHITE: Mr. Chairman, Members, my name's John 

10 White. I'm representing the Sierra Club. 

1 1 I regret that I ■ m here today to oppose the 

12 confirmation of Ms. Schafer as Chair of the Board. 

13' Before going into my reason, I would like to clarify 

14 that, for the record, if we want — we won't have too much 

15 further discussion about ethanol — that the environmental 

16 community in Washington was, I think, largely opposed to the 

17 ! mandate, which was the subject of the lawsuit. So, in this 

18 case, there was agreement. Not often is that the case between 

19 the oil companies and the environmental community with respect 

20 to that mandate. 

21 That's not what I came here to talk about, but I did 

22 feel that in light of the earlier discussion, it was important 

23 that we make clear that while we have disagreements with 

24 Ms. Schafer on some things, this is not among them. 

Our concerns are primarily with the lack of 

performance in the agency since Ms. Schafer 's appointment. We 



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have found her to be accessible, and personable, and qualified 



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in terms of her background. But we are troubled by the trends 



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64 



that we've seen, particularly in recent weeks, of a preference 



for avoiding some of the key responsibilities that need to be 



3 



undertaken . 



4 Senator Ayala's questions earlier about the truck 

5 j smoke enforcement suspension, I think, are illustrative of that 

6 concern. 

7 Also with respect to the FIP, I think that the 

8 contrast we would have — we would point to is, even though we 

9 were on the other side of the Legislature's proposed compromise 
•0 with EPA on smog check, unlike in the case of the FIP, the 

11 Legislature and the administration did propose an alternative to 

12 what they objected to the EPA proposing. And until today's 

13 hearing, we really hadn't had an indication that the 

14 administration was prepared to propose a detailed response to 

15 |i the Federal Implementation Plan. And that's crucial because the 

I 

16 j things that are in that Federal Implementation Plan are things 

17 that would be onerous for California, and we believe that the 

18 primary mechanism for avoiding that confrontation with the 

19 federal government is by actions of the California Air Resources 

20 Board . 

21 There's been references to the number of efforts 



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under way to develop alternatives. The silence from the Board 
in respect to those efforts has been deafening. 

We also are troubled, having, I think, witnessed the 
strong leadership over the last 20 years through multiple 
administrations, going back to Ronald Reagan's time, the Air 
Resources Board has been a leader. Senator Petris had a bill, 
as I recall, that got us all started down this road with an 



65 

1 effort — 

2 SENATOR PETRIS: Up this road. 

3 MR. WHITE: Up this road, and we've had bipartisan 

4 support. We have had good strong technical leadership. 

5 But what's been lacking, I think, in the recent 

6 months of this administration is the degree of independence that 
this agency has enjoyed over its history. We are troubled by 

8 the interventions, regular intervention, it appears, with 

9 Cal-EPA. We think that the rhetoric on the FIP that the 

10 Governor and Secretary Strock have been evincing is not helpful, 

11 and it, I think, makes the Air Board's job more difficult. 

12 And we appreciate the Committee ' s questions that have 

13 been asked. We think they're helpful, and we believe that there 

14 needs to be some clear signal that we're going to move towards 

15 collaboration and the resolution of these issues, because 

16 they're too important to be allowed to continue. 

17 We would like to associate ourselves with some of the 

18 earlier remarks of witnesses lauding the continuation of the 

19 electric vehicle mandate. We think that was important, but what 

i 

20 we really think is that the heavy-duty vehicle standards and 

21 off -road vehicle standards, which are at the heart of the FIP, 

22 need to get the same priority that the electric vehicle program 

23 has gotten, and it hasn't been the case. So, we're troubled by 

24 that . 

Those are my remarks . 

SENATOR CRAVEN: Very good, Mr. White. 
Let me ask a question, if I may. I realize that the 

Sierra Club is a very vast organization with tremendous 



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i: 
I 

1 membership. 

2 Do they have someone with technical expertise in the 
field in which we are speaking to advise them as to the 

4 negatives or the positives in anything that you are talking 

5 about? 

6 MR. WHITE: Yes, we have — 

7 SENATOR CRAVEN: Do you know? I mean, are you a 

8 technician? 

9 MR. WHITE: Only by rote, I think. I have worked on 

10 these issues for some time. I'm not — 

11 SENATOR CRAVEN: I'm not implying that — 

12 MR. WHITE: Oh, no, and there are people with whom I 

13 converse on a regular basis, and who the Board — for example, 

1 4 the volunteer leadership of the Sierra Club with whom I was 

1 5 consulting on this particular issue includes physicists, 

16 chemists, scientists, as well as advocates. So, I think we 

1 7 bring a degree of commitment to these issues, but we also have 

18 issues where we disagree. 

1 9 We disagreed with the previous Board Chair from time 

20 to time, and in other administrations we've had occasional 
disagreements . 

I think our concern here is that a pattern has begun 

23 to emerge that we find troubling. 

24 SENATOR CRAVEN: I can understand that. You're 
entitled to your opinion, as I am mine. 

When I hear Sierra Club, I think of trees. They have 
nothing, to me — well, maybe they do have something to do with 
clean air, come to think of it, but that's a rather tenuous tie, 



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is it not? 

MR. WHITE: It is, Senator Craven. However, we have 
j also been involved with almost every major air quality issue in 
this state over the last 20 years. 

SENATOR CRAVEN: That's fine. That's to your credit, 
But endorsement is not necessarily knowledge. 

MR. WHITE: Indeed, indeed. 

SENATOR CRAVEN: Very good, fine. Let's have lunch 
someday . 



Anyone else? Yes, Senator Petris. 
SENATOR PETRIS: I'd like to ask Mr. White. I've 
read his letter dated today, which I think for the Sierra Club 

13 is unusually deferential to people who've been traditionally 

14 opposed to our air pollution control program in their 
nearsightedness in treating it as a 100 economic issue, 
particularly under Governor Deukmejian. He felt that it wasn't 

17 any business in the state that could ever do any wrong at any 

18 time, and therefore, any bill that tended to offer some kind of 

19 regulation and correction was anathema and he vetoed them, time 

20 after time. That was his pledge in the campaign. 

However, he also, under his tenure, did some good 

things. I think your letter should be viewed in that context, 
because you are giving credit to him and to Governor Reagan. 

Let me just quote in part that you're troubled 
because Ms. Schafer, according to the view of the group, has not 
maintained that independence and the bipartisan spirit that 
prevailed prior to her, where other Chairs had been appointed by 
conservative Republican governors. 



68 

1 You're contending, and I'm quoting now: 

2 "She has not maintained the tradition of 

3 independence and scientific excellence 

4 which, since Ronald Reagan's time, has 

5 been the source of the Air Resources 

6 Board's bipartisan support and worldwide 

7 reputation in the control of vehicular 

8 emissions and developing advanced 

9 technologies. Instead, she's become an 

10 instrument of unprecedented politicization 

11 of California's air quality problems by 

12 the Wilson administration. " 

13 I gather from that, you're claiming there's a major 

1 4 change of direction in the policy, unprecedented, which did not 

li 

15 occur under the prior conservative Republican governors who, 

I 
■ ii 

16 although they may have disagreed, we all know they disagreed to 

1 7 some extent, they felt that the mission of this Board was so 

18 important to the health of the people of California in order to 

19 maintain air quality, that they kind of kept their hands off. 

20 And they appointed people who maintained an independence, and 

21 who followed the mission of the Board as set forth in the 

22 statute that created it. 

23 Does that summarize your position? 

24 MR. WHITE: That's correct, Senator. It is with some 
reluctance, because we have found, again, things to like about 
Ms. Schafer, and have not found her unapproachable. But we have 
felt that there has been a transition and a change from the 
previous history, and we felt that was grounds for making this 



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view. 

i 

2 SENATOR PETRIS: Thank you. 

3 SENATOR CRAVEN: Thanks, John. 

4 State your name, please. 

5 MR. MARKIN: Mr. Chairman, Members, my name is Tom 

6 Markin, Director of California Governmental Organizations for 

7 ARCO . 

8 I'm sorry for testifying out of turn. I'm not 

9 opposed to Ms. Schafer's confirmation, but I felt it appropriate 
to discuss the oil industry's side of the ethanol controversy 

n that folks have tried to surface today. 

12 SENATOR CRAVEN: Fine, if you can do it without 

13 making it too lengthy. 

14 MR. MARKIN: Absolutely. 

15 What is at issue is whether or not California should 

16 comply with the federal EPA's mandate on ethanol use in gasoline 

17 in the winter time. We are required to use some compound to 

18 boost the level of oxygen in the winter of our gasoline so that 

19 I it will be lower in its emissions of carbon monoxide, and we've 
been doing that for a couple of winters now. 

21 ARCO has used both ethanol-based and methanol-based 

additives. We appreciate the flexibility provided in using both 
types because it allows us to buy this additive at the lowest 
price possible. Therefore, our gasoline can be sold at the 
lowest price possible. That's ARCO's market niche, and that's 
why people go and buy their gasoline at ARCO. 

So, we opposed the mandate that a fixed percentage of 
that oxygenate be ethanol-based fuel. We prefer to be fuel 



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70 

1 ; neutral, and we truly see a need for that neutrality. And I 
know you've heard that term used a lot today, but in our minds 

3 what that means is that the Air Board ' s setting standards for 

4 the composition of gasoline, and then allow the industry to use 

5 the components that they can to make that standards as cheaply 

6 as possible, because that's in the best interests of the driving 

7 consumers of California. 

8 So, when we say we want these rules to be fuel 

9 neutral, that means set a standard and allow the market to 

10 determine the components that go into that fuel . 

11 The Air Board scientists have calculated that the 

12 incremental emissions of using ethanol per the U.S. EPA standard 

13 jj would be 20 tons a day volatile organic emissions. We have no 

14 reason to question those calculations. In fact, I believe our 

15 j scientists would concur that there are additional emissions 

16 associated with the statewide use per the U.S. EPA standards. 

17 i Ethanol is taxed differently than methanol-based 
I 

18 | fuels, and there is another calculation that says the state 

19 ij would lose approximately $60 million annually in gasoline tax 

i! 

20 i related revenues . That is another reason for the administration 

I 

21 \ to be concerned about enacting this type of policy. 

22 But we applaud the Air Board's application of a fuel 

23 neutral policy on oxygenation. We think it was the right 

24 decision. We think it meant that the cleanest gasoline is going 
to be made available in plentiful quantities, at the lowest 
price, with fair tax treatment. We see nothing wrong with CARB 



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27 adding in quantifiable numbers onto an American Petroleum 



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Institute lawsuit to try to get the EPA to reconsider this rule. 



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71 

1 So, I think if you cut through some more rhetoric, 

il 

they're doing it to make sure we can buy clean fuel, enough of 

3 it, and at the lowest price possible. 

4 SENATOR CRAVEN: Fine. Senator Ayala, did you have a 

5 question? 

6 SENATOR AYALA: I didn't have one, but I wanted to 
clarify a point that I think he said. 

8 He said let the marketplace determine the different 

9 ingredient that goes into our fuel, or something like that? 
MR. MARKIN: Yes, Senator. The specification is how 

much oxygen must be in gasoline in the winter, and there's a 
12 minimum amount that must be in there. We can use a number of 
different materials to achieve that. One is called MT ethanol . 
SENATOR AYALA: Regardless of the health risk 

15 involved? 

16 MR. MARKIN: I don't — 

17 | SENATOR AYALA: Because we don't want to pollute the 

18 air, and if you use certain fuels, it doesn't make any 

19 difference what the health risk is as long as the marketplace 

20 determines what different fuel you're going to use? 

21 MR. MARKIN: The health risk at target, Senator, is 

22 the carbon monoxide emissions when you burn this fuel. In the 

23 winter, that's more of a problem because of atmospheric 

24 conditions . So if you add oxygen to the fuel so it can burn 

25 more completely, so that you wind up having lower carbon 
monoxide emissions, and many of these additives will achieve 



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SENATOR AYALA: I understand that, but I don't think 



72 



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11 

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the marketplace should determine the different ingredients, and 
to heck with the health risks involved. I think that they 
should determine if the health risk is within its affordable 

4 uses and that people can live with that. I don't think they can 

5 just let them go and let the marketplace and economy decide 

6 whether they use any kind of fuel or not, specially in my 
district, which is part of the most polluted area in the 
country. 

9 MR. MARKIN: Senator, regardless of the oxygenate 

used, the tail pipe emissions are relatively the same. 

What is at issue is, when using ethanol, sometimes 
the evaporative emissions from the fuel system may be greater 

13 ! than if we had used a methanol-based additive. 

:i 

14 |j SENATOR AYALA: Okay, thank you. 

i 

15 SENATOR CRAVEN: Senator Petris . 

16 SENATOR PETRIS: I'm interested in the comment about 
the marketplace. We hear that a lot up here. Industry doesn't 
like us get in their hair, so they say: let the market do it. 

If the marketplace were working the way you content, 
20 there wouldn't have been one statute in this field. As was 

pointed out early on, I've carried a lot of legislation relating 
to air pollution. At that time, the industry said there wasn't 
any problem. The oil industry came in and said, sat where 
you're sitting, and said there's no problem. The automobile 
industry said there's no problem. 

Finally, when the scientific evidence came in, and 
the number of deaths were calculated, especially in Southern 
California, including Senator Ayala's district, they said, 



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73 

1 "There is a problem, but we're not contributing to it. It's not 

2 I our problem . " 

3 And that way, they buy time, and they buy time. They 

4 keep the government away, and get another year, two years, three 

5 ; years. Finally they say, "Well, apparently there is a problem, 

6 but we should solve it, not you." So that buys them another 

7 three years, and more people die. 

8 I find that attitude unacceptable . I think it ' s 

9 arrogant. I think it's insensitive. I think it reflects a 

10 great deal of greed. 

11 Now, I'm not talking about you personally. I realize 

12 you're the guy here speaking on behalf of some people. 

13 But if the marketplace worked the way industry 

14 contends, when my bill went in, there would have been a mad rush 

15 | to be the first company to clean it up, clean up the fuel, and 

! 

I 

16 I then say to the public, "Hey, we're not selling this dirty stuff 

17 that Petris is hacking at us about. We're selling the clean 

18 | stuff." And those companies, or that company, would have made a 

19 i fortune in doing it and got a tremendous amount of good will, 

20 ' and the others inevitably would have had to follow. 

21 But we didn't see that. We didn't see that. They 
didn't see the competition. We saw a unanimous position by all 
the companies, just like you drive down the street go to a 
station, the chances are it doesn't matter which station you go 
to from the standpoint of the consumer's cost, gasoline's the 
same price. The variation is very, very little until there's 



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some kind of a gasoline war and somebody breaks ranks, and that 



28 



lasts a short time, then they go back to the prior. 



74 



1 So, I get very nervous and skeptical when I hear: 



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well, the marketplace will take care of it. We've had so many 
problems that could have been solved without our interference. 
And some people in the private sector think we're whistling 
around here, figuring out ways to jump in, to interfere. 

We'd rather stay out. It's that attitude that drags 
us into the fight. For God's sake, how long are we going to 
have senior citizens dying of heart disease aggravated by air 
pollution in the L.A. Basin? That's why we went in. 

I put the first bills in because doctors asked me to 
do it, my own personal physician and a lot of public health 
doctors. They pointed out to me that the fastest rising health 
menace in California at that time was due to air pollution. 

Why should we have to jump into that? Why couldn't 

15 ;| the industry take care of that? They didn't give a damn, that's 

|l 

16 why. They were in a state of denial for so long that we were 

compelled. 

I remember Rumf ord way before the name was famous . 
You know, he was a pharmacist, and he knew something about 
health. He was Chairman of the Public Health Committee, and he 
was the first one who started whittling away at that before I 
ever got up here. 

Anyway, I just wanted to explain my reaction to kind 
of inviting us to turn everything over to the competition in the 
marketplace. It's just not going to happen. 

MR. MARKIN: Senator, I hope you understand, let the 
marketplace decide is related to the additive that we use in the 
winter to our gasoline to achieve the standards set by the Air 



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75 

1 Resources Board, and we have a couple of choices on what type of 

2 material we use. They'll all meet the standard. 

3 What we desire is the choice to choose among those 

4 alternatives so that we don't have to unnecessarily pass along 

5 the cost in our product. 

6 SENATOR PETRIS: Even on that, are you talking about 

7 the ROR, and what happens in the winter months? 

8 MR. MARKIN: Yes, sir. 

9 SENATOR PETRIS: The only report that came out of the 

10 Board was way back in 1987, and they talked about the summer 

11 effects. They didn't say anything about any problem in the 

12 winter. And they were supposed to have studied this. Maybe 

13 they did, I don't know, but their report doesn't reflect it. 

14 MR. MARKIN: I'm not the one that did these numbers, 

15 i but I believe that, based on the last two winters, we've seen a 

16 real good improvement in the carbon monoxide emission in the 

17 j air, in some part due to the programs. 

18 It's an effective program — 

19 SENATOR PETRIS: I hope so. 

20 MR. MARKIN: — and we're simply advocating that we 

21 be allowed to choose from a menu of additives. 

22 SENATOR PETRIS: Thank you. 

23 CHAIRMAN LOCKYER: Let me ask if there others who 

24 wish to comment? Anyone else that wishes to make a comment? 

25 Are there Committee Members? 

26 MS. GIBSON: We're here to support the confirmation. 

27 Thank you for the opportunity to speak. 

28 I apologize for speaking out of turn. 



76 

My name is Evelyn Gibson, and I represent the 
California Independent Oil Marketers Association. 

CHAIRMAN LOCKYER: We heard from them earlier. 

MS. GIBSON: Oh, you have, okay. We're somewhat 
disorganized today. 

CHAIRMAN LOCKYER: Well, you're already on the 
record. 

MS. GIBSON: Thank you very much. 

CHAIRMAN LOCKYER: Thank you. 

SENATOR PETRIS: Mr. Chairman. 

CHAIRMAN LOCKYER: Senator Petris . 

SENATOR PETRIS: I want to apologize for being tardy. 

I'd like to ask the nominee about another field in 
which I've been interested for sometime, and that's pesticides. 

The evidence is growing that pesticides and other 
chemicals used by agriculture are a major source of volatile 
compounds that contribute to the creation of ground level ozone, 
smog. The EPA at the federal level in the FIP plan estimated 
that they may contribute 10-15 percent of the VOCs in 
agricultural regions like Sacramento and the San Joaquin Valley. 

If that's accurate, it's an extremely large source 
that's not currently regulated or controlled. I'm interested in 
the Board and your attitude regarding addressing this problem of 
pesticides. It seems to have been ignored by the Board. 

I know there's a lot of things to worry about, and 
there's plenty to do. It's not like there's nothing to do. 

I would appreciate some comment from you relating to 
the pesticide menace that we have in the agricultural areas of 



77 

|| 

1 the state. 
ji 

2 MS. SCHAFER: Now that we have succeeded in reducing 

ji 

3 li emissions from stationary sources and mobile sources, such as 

4 light duty vehicles, through the programs we've been discussing 

5 and implementing over many years, the remaining sources 

6 obviously now appear to be a larger percent of the contribution 
to the problem. 

Certainly it's evident that pesticides containing 



8 



9 volatile organic compounds could be a significant contributor 



10 

n 

12 



that should be addressed. The EPA's plan proposes to address 
this in one way; however, we have been working with the 
Department of Pesticide Regulation even before the Federal 

13 Implementation Plan came to fore to develop a statewide 

14 regulation — 

15 SENATOR PETRIS: How long? 

16 MS. SCHAFER: It's been going on since last year at 

17 least, but I know that they've been meeting and are trying to 

18 develop a regulation for California. 

19 One of the first jobs that needs to be done is to get 

20 an update on the inventory. The inventory that we have, the 

21 baseline information that we have, is a bit out of date because 

22 patterns of use change over the years. So, we're working with 

23 the Department of Pesticide Regulation, which has primary 
authority to regulate pesticides and their pesticidal use, in 
developing a statewide regulation with part of our State 
Implementation Plan and proposed to be forwarded to the EPA as 



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one of the SIP measures. 



28 



The DPR is taking the lead, but we are giving them 



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I significant assistance in trying to update the inventory and to 
develop a regulation that will achieve significant reductions, 
in the order of the 20-45 percent that EPA had identified, but 
do it in a way that will allow us to optimize the use of 
pesticides, particularly not to penalize those that may be used 
in a very small amount, but which may have a high VOC content. 
We're trying to come up with a program that will get the overall 
benefit, but do it in a way that doesn't disadvantage any one 
part of the agriculture community over another. 

SENATOR PETRIS: So, I am to believe that you do have 
a plan, and you are attempting to address that? 

MS. SCHAFER: Absolutely. It's being developing now, 
but we ' re trying to first update inventory information so that 
we can identify where this material is coming from. 

But the regulation we would propose would go into 
effect in about the same time frame as what EPA was proposing, 

17 but this would be one that's drafted here in California. 

18 SENATOR PETRIS: Did you do independent monitoring or 

19 studying of the EPA publications of the most hazardous 
pesticides? 

By law, they're required to publish and go after 
those and try to eliminate. Last year, the Governor pulled off 
the list one of the most devastating of all. I don't remember 
the name of it. In fact, I've never remembered the chemical 
names for these things, having been totally ignorant about the 
chemical world except the impact it * s having on our farmworkers 
and others . 

Did your Board look into that, removal of that 



79 

1 particular pesticide when that was done? It was either last 

2 year or early this year. 

3 MS. SCHAFER: I don't have any personal knowledge 

4 about that particular chemical . 

5 As I said, the Department of Pesticide Regulation 

6 does regulate pesticides and their pesticidal use. 

7 Our involvement would be if, after the use of this 

8 pesticide had taken place, to make sure that emissions are 

9 captured and not migrating to have an impact on the public 
10 health, and I know that our people would be involved to the 
U extent that that might be a consequence. 

12 SENATOR PETRIS: How do you do that? Can you walk me 

13 through that? Do you have inspectors roaming around the state? 

14 MS. SCHAFER: Actually, the Air Board — the 

15 authority for actually regulating pesticide as an air pollutant 

i 

16 jj is, in California, perfectly reserved to the local district, the 

17 air quality management district. 

18 However, we certainly provide technical information 

19 and guidance about developing regulations to deal with those as 

ij 

20 jj a general guide for consistency around the state. 

21 SENATOR PETRIS: It comes under your general mission, 

22 doesn't it, of air quality? 

23 MS. SCHAFER: Yes, sir, under our general mission, 
that's correct. But we do in California share responsibility 

25 with the local districts in this area and in the area of 



26 
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stationary sources . 

On the flip side of that, our responsibility are the 
consumer products, for example, or the motor vehicles, the Air 



10 



80 

1 Board takes the lead. So, that's a split responsibility. 

2 SENATOR PETRIS: Whose scientists are there? Which 

3 scientists are primarily responsible for doing this? Is it the 

4 Division of Registration, is it the EPA, is it your shop, or is 

5 it a little bit of each? 

6 MS. SCHAFER: It's a little bit — the way the staffs 
work in California, there's a little bit of each, for those 

8 areas where we have primary responsibility, we do have 

9 scientists who are capable of looking at the air quality impact 
of pesticides after they are used. 

11 SENATOR PETRIS: If I want to use — let's say I've 

12 developed a new pesticide that I want to use in agriculture. I 

13 go to the Division of Registration, Pesticide Regulation and 

14 Registration. I have to get their approval, right? 

15 Now, do you look into that at all, any of that 

16 process? 

17 MS. SCHAFER: I don't believe that we have a 

18 responsibility in regulating the use of pesticides. First of 

19 all, under the federal law, EPA registers pesticides for use, so 

20 | they have a whole scientific infrastructure for handling that as 

21 !| well. 

I 1 

22 However, if there is a pesticide, after it is used, 

23 released into the atmosphere, then we would have a concern, and 

24 we would have scientists working with the local districts on 

25 addressing those problems. 

SENATOR PETRIS: So, the alarm, I guess, would be 

sounded by the local district in a given area. It wouldn't be 
primarily yours? 



26 

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81 

MS. SCHAFER: If it is — yes, that's where the 
authority currently lodges, the way that we have written rules 
here in California. 

SENATOR PETRIS: I understand you're very determined 
to make sure there ' s a proper balance between the economic 
interests that are involved and safety. Some of us critics 
sometimes have felt that the administrations have come down too 
quickly on the side of the economic interests and at the expense 
of the public health interest. 

That's why I'm wondering, and that's why I'm asking 
these questions about just what does your group do compared to 
the others, and where do the scientists come in. 

We've had some pretty bad episodes for awhile in 
which the Pesticide Regulations scientists, who were top-flight 
and admired by all who knew the program, had their 
recommendations reversed by another level, presumably on the 
economic issue. We felt at the time it was political pressures 
and responding to political friends . 

So, we had some notable scientists who had worked 
very diligently to make certain that we were going in the right 
direction, and who would recommend in some cases that a 
particular pesticide be rejected: "We should not use this 
pesticide in California for the following reasons. Our tests 
show this, and this, and this, and that." 

The political guy upstairs would reverse that and 
say, "Go ahead and sell it." 

About 18 of the scientists quit. They said, "Our 
mission has been totally undermined by the political side of the 



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administration. " 

So, the reason for my question is that I'm wondering 
if there are safeguards against any kind of repetition like 
that, because this administration has been more partisan in this 
area than the last one and the one before. 

MS. SCHAFER: I'd like to confine my comments to 
those matters under the jurisdiction of the Air Resources Board. 
And so in my area, I can assure you that we have continued the 
tradition of staunch regulatory advancement of what we call 
technology forcing regulations to meet our air quality goals, 
and those are the health protective goals that underlie all of 
the standards . 

I have no experience with any intervention in the 
decision making process of the Board. We have upheld our low 
emission and zero emission vehicle standards which we believe 
are the fundamental underlying reasons for the achievement that 
we have been able to have in the last 20 years of improvement in 
air quality in Southern California. Exposures in Southern 
California have been reduced 50 percent. 

The issue before us now is how we're going to get the 
rest of the way there between now and 2010, which is the goal 
the Clean Air Act has set for us in Southern California. And 
the formula that we've found, and the Wilson administration 
supports it strongly, is one that is technology oriented, 
combining the vehicles and the fuels as a system, and being as 
encouraging of new technological advancement as we possibly can 
be. 

And I think we have a strong foundation. I certainly 



83 

don't want to take credit for a lot of the regulations that have 
passed before my time, but I can assure you that I sill stand 

3 firm in pursuing the the standards with the best scientific and 

4 technical staff in the world. Everyone realizes that, and has 

5 acknowledged that, and has reminded me of that, that are lodged 

6 at the California Air Resources Board. 

7 So, I think that we have the capability of reaching 

8 towards the rest of the work that needs to be done, and I'd like 

9 to pledge my cooperation with this Committee and the rest of the 
•0 Wilson administration to see this through. 

11 CHAIRMAN LOCKYER: We've heard, Senator, this 

12 particular slogan a number of times during the course of the 

13 morning: the technology driven solution. It sounds a bit like 

14 the magic wand that's going to help us avoid making difficult or 

15 unpopular decisions. 

16 i So, since the Senator began asking about pesticide 

n rules, and I understand you had commented earlier on sort of the 

18 need to assess effective strategies, that there's the N0 X side 

19 of the equation, there's the organic compounds side, and you're 

20 trying to assess the most efficacious approach. 

21 If EPA, federal EPA, is right, that perhaps in our 
large agricultural zones that organic compounds resulting from 

23 pesticide emissions could be as much as 10 or 15 percent of the 



24 



problem — 



25 MS. SCHAFER: In certain areas. 



26 



27 that? 



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CHAIRMAN LOCKYER: Yes. What have you done about 



MS. SCHAFER: We're developing a regulation — we're 



84 

1 ahead of where EPA would be in developing its regulation — for 
the effective control of the volatile organic compounds that are 
found in pesticides. 

4 CHAIRMAN LOCKYER: So this is another work in 

5 progress. 
MS. SCHAFER: As EPA ' s is, yes, sir. This is an area 

which has not previously been addressed in either federal or 

8 state regulation. 

9 But as we achieve better and better control of the 
traditional sources and the larger sources of air pollution, 
what we see emerging is the remaining sources . And that ' s our 



10 

n 



12 task before us, to plan for that, and then to work on that over 



the next 25 years, which is that attainment period Congress has 
given us . 

15 CHAIRMAN LOCKYER: Other questions, Senator? 

16 SENATOR PETRIS: Well, that leads to the basic 
question, who's going to be in control and in charge? Is it 
going to be the Department of Pesticide Regulation, which in the 
past, it's kind of evolved into a voluntary thing. The ARB 
isn't voluntary. When they say you've got to have a certain 
number of electric cars by a certain year, the only volunteers 
are going to rush out and buy the car now. But apart from that, 

23 it ' s a position of a mandate on the industry. 

24 So, that's why I'm asking the questions. Are you 
folks going to really be in charge ultimately, in view of the 
history we've had in the other areas, the other agencies, or 



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MS. SCHAFER: As I said, the jurisdiction in 



85 

1 California is split among a number of authorities. 

2 Because the Department of Pesticide Regulation has 
the primary responsibility for regulating these products in 

4 their use, they are taking the lead. We are working 

cooperatively with them, and they have pledged to produce a 
!| 
6 i regulation over the course of the next year which we can then 

submit to EPA as part of the State Implementation Plan. 

8 We fully appreciate that that's a practical way of 

9 handling the authority split on this issue, but I think they're 

10 going to get the VOC reductions that we require as a result of 

11 it, and therefore it's probably a very good way to go. 

12 SENATOR PETRIS: My final point, Mr. Chairman, 

13 there's an impressive list of letters, strongly urging approval 

14 of Ms. Schafer's nomination. 

15 What makes me nervous is, they come from the industry 

16 that's being regulated. If we've got a very vigorous enforcer, 

17 looking out first of all for the consumer's interest and the 

i: 

18 I health, chances are those companies would be opposing such a 

ii 

19 j policy. 

20 So, that's why I have a little skepticism here and 
I'm raising these questions. 

22 MS. SCHAFER: I hope that you will find some 

environmental groups among that list, too, Senator. I believe 

24 there are — 

25 SENATOR PETRIS: There is one. 

26 MS. SCHAFER: There are at least four that I'm aware 
of. I hope you have the full list. 

SENATOR PETRIS: Only three or four? Better than 



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86 



nothing; isn't it? 

MS. SCHAFER: They're pretty impressive 
organizations . 

SENATOR PETRIS: I remember one that I read is the 
one that I've had a great deal of admiration for over a period 
of many years, and that's a big plus. 

MS. SCHAFER: Thank you, sir. 

SENATOR PETRIS: Thank you. 

CHAIRMAN LOCKYER: I guess we've heard all the 
testimony. 

Again, my suggestion to the Committee is that we take 
the matter under submission, and act on it at an appropriate 
time, later in the session. 

Thank you for your assistance. 

MS. SCHAFER: Thank you very much for the 

16 opportunity, Mr. Lockyer. 

17 CHAIRMAN LOCKYER: I think we have miscalculated how 

18 much time these matters would take. I'm feeling a little like 

19 the former chair. Everyone said, "Oh, this is great. You're 
really whipping along," and here I am, taking a lot of time. 



21 ,' I think we perhaps need to make sure that any witness 



that came from out of town about any of the nominations that are 
before us has an opportunity to get their comments inserted in 
the record. I think that would be appropriate. 

Then there's at least Mr. Flournoy who, I guess, came 
from out of town. 

SENATOR CRAVEN: Mr. Dunphy also. 

CHAIRMAN LOCKYER: Well, he's around all the time, I 



10 



87 

1 think. 

1 I'm trying to figure out how to manage our time so 

3 that either a nominee or a witness from out of town can be 

4 heard. Ms. Edgerton would be, I guess, another on that kind of 

5 list. 

li 

6 Maybe what I should do is indicate that we'll hear 

comments on Mr. Flournoy, on Ms. Edgerton, and then any other 

8 witness that's out of town with respect to the other appointees, 

9 but we'll release all of those appointees so that you can go get 
some productive work done. 

11 So, Mr. Dunphy and others, I apologize for the fact 

12 that we've been taking as long as we have. So, Mr. Dunphy, and 

13 ' Kozberg, and Sharpless, I would assume we would have to take up 

14 a different day. We're working on coordinating our calendars to 

15 find out when we could — maybe in the mornings or something — 

16 have an opportunity to do that. 

17 Let me get back to Mr. Dunphy, Kozberg and Sharpless 

18 | about the appropriate time to call them forward. 

19 ii If there are witnesses from out of town relating to 

20 ji those , I think it ' d be appropriate in a moment to get them on 

■ 

21 the record, if there are such, about any of the appointees. But 

22 we'll hear from the appointees at a different time. 

23 Meanwhile, we'll go to Ms. Edgerton next, and then 

24 Mr. Flournoy, and that will probably be it for today. 

25 We ' 11 take a five-minute break and let Member go to 

26 the Floor, figure out what's going on there, and we should be 

27 back in a few minutes . 

[Thereupon a brief recess was taken. ] 



28 



88 



1 



CHAIRMAN LOCKYER: Let me inquire of those present, 
who is here to testify on the Edgerton nomination? For of 
those . How about Flournoy? Just checking on who ' s here . 

4 Let's call Ms. Edgerton to come up. Iron City 

5 Fishing Club. 

6 MS. EDGERTON: Is that the first question? 

7 CHAIRMAN LOCKYER: I'm curious as to what it is, but 

8 you'll probably tell us. 

9 Why don ' t you go ahead and start with any general 

10 comments that you would wish to make . 

11 I'll note that I don't think there's any opposition 

12 i in our file. 

13 MS. EDGERTON: Thank you, and thank you for staying 

14 late today to let me get finished so that I can go back to Los 

15 Angeles . 

16 Mr. Chairman, Members of the Committee, I thank you 

17 for the opportunity to appear before you in connection with 

18 senatorial consent to my appointment to the California Air 

19 Resources Board. 

20 It's been a great honor and a privilege to serve for 

2 1 the last nine months as a member of the California Air Resources 
Board, and under the outstanding leadership of Chairwoman 
Jacqueline Schafer. 

My principal interest in connection with my service 
on the Air Resources Board is to work with the Legislature, 
California business, environmental groups, citizens, all 
concerned with clean air, to achieve steady environmental and 
economic progress for our state. 



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89 

Prior to joining the Resources Board, I served as 
Vice President of Cal-Start, a California nonprofit consortium 
encouraging the development of an advanced transportation 
technologies industry in California. As you know, California's 
mission is to clean the air, create jobs, and increase our 
state's economic competitiveness. 

This fall, I will teach environmental law — co-teach 
environmental law with Professor Larry Berg as an adjunct 
professor in the University of Southern California's Unruh 
Institute. 

Formerly, I practiced environmental law as a senior 
attorney and consultant for the Natural Resources Defense 
Council, specializing for almost a decade in coastal protection, 
climate change, and clean air. My book, The Rising Tide, Global 
Warming, and World Sea Levels , was published in 1991. 

I currently serve on the board of the Environmental 
Law Institute, Green Seal, the Climate Institute, and Mothers 
and Others for a Livable Planet. In addition, I am alternate 
commissioner of the California Coastal Commission, and a 
participant in the California Environmental Technology 
Partnership, and I formerly served on the Fuel Cell Subcommittee 
of the Select Committee of Project California, which is part of 
the California Council on Science and Technology. I am 
especially committed to working to establish California as a 
home base for fuel cell technology, which I expect to be a 
premier clean air technology in the 21st Century. 

Since joining the Board, I have been guided by the 
explicit directives of both the federal Clean Air Act of 1990 



90 

1 ii and the California Clean Air Act, which directs the ARB to adopt 

, I 

2 measures to secure healthy air for Calif ornians, and I quote, 

3 "as expeditiously as practicable." 

4 During this period, the Board, under Chairwoman 
■ 

5 ; Schafer's able leadership, has, among other things: reviewed 

6 their low emission vehicle clean fuels program, which provides 
for the introduction of low and zero emission vehicles to clean 

8 i our air and to help meet federal and state clean air 

9 requirements; reviewed phase two of the reformulated gas 

10 program, which provides specifications for the world's lowest 

•1 polluting blend of commercial gasoline in the world; adopted 

12 measures to reduce emissions from off-highway recreational 

13 vehicles; revised evaporative emission standards; approved the 

14 South Coast Air Quality Management District's regional clean air 

15 incentive market reclaim; and worked on California's efforts to 

16 meet Clean Air Act requirements by developing the best possible 

17 State Implementation Plan. 

18 In closing, let me thank you for your legislative 

19 I leadership on clean air and the economy, and express my desire 

20 and commitment to working with the Legislature to achieve our 
shared goals . 

I want to add that it ' s been a great privilege to 
serve on the Air Resources Board with Jacqueline Schafer. 
24 Chairwoman Schafer and I came on this Board together, have 
greatly enjoyed working together, and have, in my view, 
accomplished much to assist California in attaining and 



21 

22 
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maintaining its high environmental air quality standards . 



28 



Thank you. 



91 

1 CHAIRMAN LOCKYER: Thank you. 

2 Are there questions? Senator Ayala. 

3 SENATOR AYALA: I have to ask you the same question I 

4 asked your boss. 

5 Are you familiar with Mayor Richard Riordan's 

6 proposal to replace pollution controls in the urban area of Los 

7 Angeles, and get tougher up in the Riverside and San Bernardino 

8 Counties, where we're the recipients of the dirty air that Los 

9 Angeles and Orange Counties produce? Yet, he's pushing it over 

10 to us for more restrictions . 

11 I was really surprised that he wants to put controls 

12 on dairy farms, and dust from farming and construction, when in 

13 the Los Angeles area, the biggest pollution is from the 

14 automobile. You know, given that the ARB's concerned with the 

15 automobiles, and the district board is concerned with stationary 

16 sources, are you familiar with the Mayor's proposal to shift the 

17 j! curtailment of pollution in the other counties when they are the 

18 producers? 

19 We're downstream polluters, really, but the main 

20 source comes from those two counties . Are you familiar with 

21 that proposal? 

22 MS. EDGERTON: Yes, I am familiar from the 

23 standpoint that I know it's been made, and I know that the Air 

24 Resources Board is participating in a task force with the South 
Coast Air Quality Management District and the City of Los 
Angeles to try to sort out that proposal . 

I'm not prepared to speak to it today because I have 
not had the opportunity to study it carefully. 



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92 

I 

1 SENATOR AYALA: You have no position on it at this 

2 point? 

3 MS. EDGERTON: No, I don't. 

4 SENATOR AYALA: Thank you. 

5 CHAIRMAN LOCKYER: Well, it sounds like something 

6 worth finding out about. 

7 MS. EDGERTON: It certainly does. 

8 I live in Los Angeles, and the air quality of Los 

9 Angeles is of paramount interest to me, and I'm aware that the 
wind blows from the ocean and pushes the air pollution into the 

11 east. 

12 CHAIRMAN LOCKYER: We've noticed that in the 

13 Legislature, too. 

1 4 MS. EDGERTON: I've seen the mountains disappear in 

15 the late afternoon. 

16 CHAIRMAN LOCKYER: Are there other questions from 

17 Members? 

18 Why don't we just acknowledge for the record those 

19 that have appeared in support. If you want to put your name in 

20 the record, we can, but I have a feeling we're looking at a 

21 I unanimous vote here, unless you figure out a way to undo it. 

22 MR. ROSS: I am Tommy Ross, Southern California 

23 Edison. 

24 We'd just like to say that we've found Ms. Edgerton's 
professional, educational and academic background, including her 
experience at Cal-Start, and we believe she's imminently 
qualified to continue her work on the Air Resources Board, and 
would continue to urge you to approve her nomination. 



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93 

CHAIRMAN LOCKYER: That was longer than necessary. 

[Laughter. ] 
MS. JONES: I'm Victoria Jones with Southern 

California Gas Company. 

We, too, are here to speak in support of Lynne 
Edgerton for a member of the California Air Resources Board and 
would urge you to confirm her appointment. 

CHAIRMAN LOCKYER: Thank you. 

MS. MARTIN: I'm Cecile Martin of the California 
Electric Transportation Coalition, and I'm here representing the 
state's major utilities, both gas and electric and gas 
utilities. 

We're here to support the confirmation of Lynne 
Edgerton. We've found her to be a very active member of the Air 
Resources Board, and we find her perspective very valuable. 

Thank you. 

CHAIRMAN LOCKYER: Thank you. 

MR. HOSSEPIAN: My name is Gorik Hossepian with 
Allied Signal Aerospace. 

I think you heard testimony earlier today in support 
of Jackie Schafer. I won't go through my comments. I'd just 
| like to say that we in full support of Lynne Edgerton 's 
nomination and confirmation for the seat, and we think she can 
bring a great vision and leadership to the Board. 

Thank you. 

CHAIRMAN LOCKYER: Thank you. 

Is there anyone who wishes to comment in opposition? 

I'll note that the file reflects no opposition 
letters or comments . 



94 
1 SENATOR BEVERLY: We haven't found out about the Iron 



City Fishing Club. Does that have anything to do with 
Pittsburg? 

MS. EDGERTON: It does. 

CHAIRMAN LOCKYER: Do they have any fish that are 



.1 



6 alive there? 



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: 

J 

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MS. EDGERTON: Actually, it's in Canada, and it ' s a 
place I've gone ever since I was a little girl, and I believe 
it's one of the things that made me an environmentalist, fishing 
in the pristine wilderness every summer for small mouth and 
large mouth bass . 

CHAIRMAN LOCKYER: Does that mean there are folks 
from Pittsburg that wander up there? 

14 MS. EDGERTON: My grandparents did. 

15 SENATOR CRAVEN: Knowing where this lady comes from, 

16 j which is Tennessee, I thought may there was an outside chance 

17 ! that it was in Bessamer, which is, of course, next door to 

18 Birmingham where they have a lot of steel. 

19 MS. EDGERTON: I'm hoping to get some fishing in here 

20 in California. 

21 CHAIRMAN LOCKYER: You should have spent some time in 



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Philadelphia. I could tell that was a gap in your — 

SENATOR CRAVEN: We lost all our factors. They all 
moved to the south. 

CHAIRMAN LOCKYER: What's the pleasure of the 
Committee? 

SENATOR CRAVEN: Move. 

CHAIRMAN LOCKYER: We have a motion by Senator 



95 

1 j| Craven. Call the roll. 

2 SECRETARY WEBB: Senator Ayala. 

3 SENATOR AYALA: Aye. 

4 SECRETARY WEBB: Ayala Aye. Senator Beverly. 

5 SENATOR BEVERLY: Aye. 

6 SECRETARY WEBB: Beverly Aye. Senator Petris . 

7 SENATOR PETRIS: Aye. 

8 SECRETARY WEBB: Petris Aye. Senator Craven. 

9 SENATOR CRAVEN: Aye. 

10 SECRETARY WEBB: Craven Aye. Senator Lockyer. 

11 CHAIRMAN LOCKYER: Aye. 

12 SECRETARY WEBB: Five to zero. 

13 CHAIRMAN LOCKYER: Good luck. Do a good job. 

I! 

14 MS. EDGERTON: Thank you. 

15 CHAIRMAN LOCKYER: Mr. Flournoy, now is the time. If 

16 there's anyone that wishes to comment, either for or against, 

17 come up to the front. 

18 Good afternoon, sir. 

19 MR. FLOURNOY: Good afternoon. 

20 CHAIRMAN LOCKYER: Thank you for your patience in 

21 waiting. 

Do you want to comment generally, you've served on 

23 the Board now for several years, right? 

24 MR. FLOURNOY: I've been on the Board for seven 
years. I'm an engineer by training and experience. 

During those seven years, I have been the only 



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27 technical member on the Board; still am. 



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I think I've done a good job. I didn't write out any 



96 

speech for this. I'll let you gentlemen ask me questions. 

CHAIRMAN LOCKYER: That'll be fine. 

Senator Ayala, do you have a question? 

SENATOR AYALA: I was looking at your background. 
You are a retired engineering consultant? 

MR. FLOURNOY: Actually, I'm just retired now. My 
last consulting job, that last dollars that I earned, was in 
1986, 40 years after the first one of 1946. 

SENATOR AYALA: Doing what? 

MR. FLOURNOY: What am I doing now? 

SENATOR AYALA: You earned them doing what? I'm 
trying to find out what your background is. 

MR. FLOURNOY: My background is engineering 
construction. I started out as a design engineer with Stone and 
Winter Engineering Corporation in Boston, designing 
power plants. I ended up as Vice President of Occidental 
Petroleum Corporation in charge of engineering and construction 
for Occidental . 

And in the meantime, I built plants and projects over 
a good many of the countries in the world. 

SENATOR AYALA: The reason I ask is because your 
category that you serve is one that shall have special 
competence in areas related to water quality problems . I was 
just wondering how your background related to that kind of — 

MR. FLOURNOY: I'm not a sanitary engineer by 
training. In other words, I would not take it upon myself to 
design a sewage treatment plant, but in most of the projects we 
had, one that comes to mind is a crude oil terminal we did in 



9 7 

1 the Orkney Islands for the — north in the U.K. This had, 

| obviously, oil and water separators, problems on the sanitary 

_ i 

3 j disposal. 

4 j Most of the projects we've had had sanitary disposal 

5 problems with them, because there were things like — and also 
II 

6 chemical. We had 1650-mile ammonia pipeline that we ran through 

Russia. I mean, there were all sorts of problems with this, 
because ammonia's toxic, so as a part of my experience going for 
9 many of these years, we always had to be sensitive to these 
things . 

And although I'm not an expert water chemist, I know 
how to deal with these matters because that ' s the way I earned 
my living. 

SENATOR AYALA: What do you see as the major water 
quality issue facing California today? 

16 MR. FLOURNOY: I think probably it's a mixture of 

17 ! water quality and water quantity. And this is what's going to 

18 \ be done in the San Francisco Bay/Delta with the requirements for 

19 the fisheries, with the requirements for agriculture, with the 

20 | requirements for — and the fishery primarily, because we got 
involved in water quality with the temperature of water, for 

instance. Well, the temperature of water is related to the 

23 amount of water that is flowing. So, the quality and the 

24 quantity become intermixed. 

In agriculture, aside from the fact that the cost of 

water is a very important thing, the runoff of pesticides from 
the under drains in the farming areas is a problem. And to 
compound it even further, I think, we have the federal U.S. EPA, 



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4 



which so far anyway, has not particularly liked the solution 
that the California Water Resources Board has come up with, so 
we have this kind of a controversy, or negotiation, or whatever 
it is . And these are very serious matters in a state where 

5 agriculture is our biggest industry. 

6 So, I think that's a real serious problem, and I 
think it ' s going to become more so because I doubt that we ' re 

8 going to see many new water resources in this state. We're just 

9 going to have to use what we have. 

'0 SENATOR AYALA: Do you agree that we can't seriously 

11 think about water problems in California without addressing the 

12 Delta first? 

13 MR. FLOURNOY: I think the Delta is the key to it, 

14 because the Delta means the Sacramento River, the Trinity, all 

15 of these Northern California rivers. 

SENATOR AYALA: That's the key. 
MR. FLOURNOY: To me it's the key, and I am not 

personally involved in it because my region does not include the 



16 

17 
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19 Delta. But from the point of view of the state, I think it's 

20 key to solving water in California. 

21 SENATOR AYALA: Thank you. 
I 

CHAIRMAN LOCKYER: Yes, Senator Craven. 

23 SENATOR CRAVEN: I'm kind of moving away from the 

24 subject matter, but I'm somewhat interested. 

This gentleman went to two of the great schools in 

this country. 



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27 CHAIRMAN LOCKYER: Elementary school and junior high? 



28 



SENATOR CRAVEN: No, no. He went to Andover. And 



99 

1 I've known of Andover for a long time, but I never knew that 
i 
they gave an M.A. degree, which is on this thing here, nor have 

3 I ever heard of Johns Hopkins giving a B.E. Now, that probably 

4 | stands for Bachelor in Engineering. 

5 MR. FLOURNOY: It does. 

I 

6 SENATOR CRAVEN: And the other one, God only knows 

7 what that means. What does M.A. mean at Andover? 

8 MR. FLOURNOY: M.A. is not a degree. That's the 

9 abbreviation for Massachusetts, because there are people who 

10 wouldn't know where Andover was. 

11 SENATOR CRAVEN: I don't know who does this, Nancy, 

12 but they're pretty tricky. The last time Johns Hopkins 

13 appeared, it was John Hopkins. They change the name of the 

14 school and everything. 

15 MR. FLOURNOY: It should have an "s" on it. 

16 SENATOR PETRIS: M period A period is not the 

17 abbreviation for Massachusetts. 

18 ! MR. FLOURNOY: There's no degree from Andover prep 

19 | school, boarding school. 

20 MS. MICHEL: You're absolutely right. 

21 SENATOR CRAVEN: It's Andover Academy, but it's 

22 Phillips Andover, because that's the family that underwrote 

23 those two schools years ago. 

24 Is it Merrimack or Andover? 

25 MR. FLOURNOY: Andover. 

26 SENATOR CRAVEN: But it's close; isn't it? 

27 MR. FLOURNOY: Merrimack is close, yes. It's just 
north of Boston, 30 miles, something like that. Then you go a 



28 



I 100 

! 

;i 

1 little further north to Exeter in New Hampshire. 

2 SENATOR CRAVEN: I said two schools, that's the other 

3 one, all of which is of great interest to these fellows who went 

4 to the University of California, and Stanford, and whatever. 

5 CHAIRMAN LOCKYER: Well, I guess I'm going to ask you 

j 

6 to comment on Supervisor Carpenter's comment that is critical or 

7 negative. Are you aware of his — 

8 MR. FLOURNOY: No, I'm not. I obviously know who 

9 Supervisor Carpenter is 
CHAIRMAN LOCKYER: It's his suggestion that you're an 

outspoken member of the group within the Sonoma County Alliance 
that's very critical of government regulatory activities, and 
specifically environmental regulations. 

Do you think that's a fair assessment? 

15 MR. FLOURNOY: No, I don't think so, no. 

16 The Sonoma County Alliance is a group which is 
business oriented, but as far as being critical of regulations, 

18 | California regulations, my experience with them has been that 

I 

'i 

19 it's not critical of regulations. It's critical of over 

: i 

20 regulating in some instances where they think it occurs . 

21 CHAIRMAN LOCKYER: Is there an example that comes to 

22 mind for you of where there was some activity or proposal that 

23 you would deem, or the Alliance and you, would deem over 
regulation that maybe Supervisor Carpenter would have supported? 
Is there anything at all that comes to mind so I could try to 
understand the dispute? 

MR. FLOURNOY: It doesn't really. 

Supervisor Carpenter has a very strong backing in the 



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101 

1 west county in Sonoma County. And there's a very strong 

antipathy toward the City of Santa Rosa. The City of Santa Rosa 

3 is the operator for a regional sewage plant. And the effluent 

4 from that sewage plant is not used to irrigate the land, the 

5 majority of it is, but the excess goes into the Russian River. 

6 And Supervisor Carpenter's constituency are people who live 
along the Russian River and — not near the river, but in the 

8 west county. 

9 And the meetings that we have usually have a 
contingent of people, from varying sides, of course, but usually 
the same faces, from that part of the county who are objecting 

12 to the activities of the City of Santa Rosa. 

13 Our Board, quite obviously, is interested in what is 
good for the water quality. The evidence that we have been able 
to ascertain is that the effluent from the sewage treatment 

16 plant is cleaner than the water flowing down the river upstream 

1 7 of the point where the effluent enters it. And this is probably 

18 beyond dispute. This has been the result of much testing. 

But this does not change the feelings, the very vocal 

feelings, of Supervisor Carpenter's constituents. So, there's a 
lot of four-letter words that get involved in this, as you can 
well imagine. So some of these hearings remind me of the scene 
I encountered coming into the Capitol Building this afternoon. 
Some guy had a bull horn, yelling at the top of his voice. 
We've had some of those situations in trying to conduct water 
quality control hearings. 

So, I mean, there are emotions that completely 
obscure that I would call scientific aspects of water quality. 



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And they involve growth, and no growth, and all this sort of 



! business. 



You're well aware of them, you gentlemen, I'm sure, 
because you must encounter them more than I do . 

CHAIRMAN LOCKYER: There seems to be some comments 
from the Russian River Alliance regarding signs in the meeting 
rooms, I guess? 

MR. FLOURNOY: There was an incident. And again, I 
was Chairman of our Board at that time. I was trying to conduct 
a hearing. We had about 200 people in a room designed for about 
a hundred people, with placards and signs, and stamping of feet, 
and all the things that go with it, a demonstration, in pfcfysr 
words. We had the State Police there; our executive officer had 
brought them in. 

I told the people that we were not going to be able 
to conduct the hearing unless we got rid of the signs. If they 

17 wanted to demonstrate and chant and wave their signs, they were 

18 perfectly welcome to go outside the meeting room, but that we 

19 couldn't conduct the hearing under those circumstances. 

And they eventually did. We did conduct the hearing. 

Interestingly enough, we — this was two years ago, we haven't 
had a repeat of the situation since, not with me as chairman, 
because I ceased to be chairman probably two or three meetings 
after that. 

But I think in the final analysis, it was beneficial, 
because it's easier to conduct business in an atmosphere like 
the one in this room, quite obviously, rather than the 
atmosphere out in front of the Capitol Building. 



10 

11 



103 

1 CHAIRMAN LOCKYER: I don't go out there. 

2 MR. FLOURNOY: I don't blame you. But you wouldn't 

3 want it in your hearing room here, I'm sure. 

4 CHAIRMAN LOCKYER: You're right about that. 

5 Are there questions from Members? Senator Ayala. 

6 SENATOR AYALA: You're seeking the appointment of 

7 District One, North Coast? 

8 MR. FLOURNOY: Yes, sir. 

9 SENATOR AYALA: How far south does that district go? 
MR. FLOURNOY: It goes down to the Esterro Americano, 

which is just a hair of it is in the northern part of Marin 

12 County, but it's basically the part of Sonoma County which 

13 drains into the Pacific rather than draining into San Pablo Bay. 

14 J Then it goes on up to Humboldt and Mendocino and — 

15 SENATOR AYALA: Does that include Santa Rosa, the 

16 City of Santa Rosa? 

•7 MR. FLOURNOY: Yes, it does, sir. 

18 It goes east to about Kenwood. And Kenwood, although 

19 I it looks very flat, east of Kenwood it starts draining into San 

20 Pablo Bay through Sonoma. 

21 SENATOR AYALA: Thank you. 

CHAIRMAN LOCKYER: Now, your slot on the Board is 
water quality. 

MR. FLOURNOY: Water quality. 

25 CHAIRMAN LOCKYER: Is that appropriate? 

26 think it is 

CHAIRMAN LOCKYER: Have you done work in the water 

quality area as an engineer, or something? 



23 
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104 

1 ] MR. FLOURNOY: Yes, although I'm not a sewage 

treatment engineer. I'm not a sanitary engineer by training. 

3 CHAIRMAN LOCKYER: But still, you would be familiar 

4 j with water quality issues? 

5 MR. FLOURNOY: Yes, sir. 

6 When you get into engineering the way I did after 40 
years and end up managing companies , you ' ve been involved in 

8 highways, and process plants, and power plants, sewage treatment 

9 plants. You can't help it. 

10 CHAIRMAN LOCKYER: You learn a little bit about all 

11 of this kind of thing. 

12 li MR. FLOURNOY: What you learn to do is how to ask 

13 j questions, and then judge from the answers you're getting 

14 whether they make sense or not. 

15 CHAIRMAN LOCKYER: Is there any question we haven't 

16 I asked you that we should? 

17 ! MR. FLOURNOY: Not that I'm aware of, but go ahead. 

i 

18 I'll try and defend myself. 

19 CHAIRMAN LOCKYER: That's all right. 

20 ' Let me inquire if there's anyone present who wishes 

21 to comment, either for or against the nomination? 

22 Senator Craven probably wishes to renew his motion. 

23 SENATOR CRAVEN: Yes, I do. 

24 CHAIRMAN LOCKYER: Which is to recommend 
confirmation. Call the roll, please. 

SECRETARY WEBB: Senator Ayala. 



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27 SENATOR AYALA: Aye. 



28 



SECRETARY WEBB: Ayala Aye. Senator Beverly. 



105 



SENATOR BEVERLY: Aye. 

SECRETARY WEBB: Beverly Aye. Senator Petris . 
SENATOR PETRIS: No. 

SECRETARY WEBB: Petris No. Senator Craven. 
SENATOR CRAVEN: Aye. 

SECRETARY WEBB: Craven Aye. Senator Lockyer. 
CHAIRMAN LOCKYER: No. 
SECRETARY WEBB: Three to two. 

CHAIRMAN LOCKYER: That one is adopted three to two, 
sir. Good luck and congratulations. 

MR. FLOURNOY: Thank you, sir. Thank you all. 

[Thereupon this portion of the 

Senate Rules Committee hearing 

was terminated at approximately 

5:12 P.M.] 

— 00O00 — 



106 

1 CERTIFICATE OF SHORTHAND REPORTER 

2 

3 I, EVELYN J. MIZAK, a Shorthand Reporter of the 

4 State of California, do hereby certify: 

5 That I am a disinterested person herein; that 

6 the foregoing transcript of the Senate Rules Committee hearing 
was reported verbatim in shorthand by me, Evelyn J. Mizak, and 

8 thereafter transcribed into typewriting. 

9 I further certify that I am not of counsel or 
attorney for any of the parties to said hearing, nor in any way 

•l interested in the outcome of said hearing. 
12 

13 this / ^ day of September, 1994. 

14 



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i/f IN WITNESS WHEREOF, I have hereunto set »y hand 

/A* 



. MlZAK ^T 



17 ^EVELYN J, 

Shorthand Reporter 
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e=£- 



261-R 

Additional copies of this publication may be purchased for $5.75 per copy 
plus 7.75% California sales tax. 

Senate Publications 

1 020 N Street, Room B-53 

Sacramento, CA 95814 

(916)327-2155 

Make checks payable to SENATE RULES COMMITTEE. 
Please include Stock Number 261-R when ordering. 



.Soo 



HEARING 

SENATE RULES COMMITTEE 

STATE OF CALIFORNIA 




STATE CAPITOL 

ROOM 3191 

SACRAMENTO, CALIFORNIA 



TUESDAY, AUGUST 23,1994 
10:03 A.M. 



DOCUMENTS DEPT. 

SEP 3 1994 

PUBLIC LIBRARY 



262-R 



SENATE RULES COMMITTEE 
STATE OF CALIFORNIA 



HEARING 



STATE CAPITOL 
ROOM 3191 
SACRAMENTO, CALIFORNIA 



TUESDAY, AUGUST 23, 1994 
10:03 A.M. 



Reported by: 



Evelyn J. Mizak 
Shorthand Reporter 



11 



11 



APPEARANCES 

2 MEMBERS PRESENT 

3 SENATOR WILLIAM LOCKYER, Chair 

4 SENATOR WILLIAM CRAVEN, Vice Chair 

5 SENATOR RUBEN AYALA 

6 SENATOR ROBERT BEVERLY 

7 SENATOR NICHOLAS PETRIS 

8 

9 STAFF PRESENT 

10 CLIFF BERG, Executive Officer 
PAT WEBB, Committee Secretary 

12 RICK ROLLENS, Consultant on Bill Referrals 

13 NANCY MICHEL, Consultant on Governor's Appointments 

14 ALSO PRESENT 
15 
16 

17 
18 

19 SENATOR QUENTIN KOPP 

20 
21 
22 
23 
24 
25 
26 
27 
28 



JOANNE C. KOZBERG, Secretary 
State and Consumer Services Agency 

SENATOR HENRY MELLO 

DEAN R. DUNPHY, Secretary 

Business, Transportation and Housing Agency 



Ill 

INDEX 

Page 

Proceedings 1 

Governor ' s Appointees : 

JOANNE C. KOZEBERG, Secretary- 
State and Consumer Services 1 

Introduction and Support by SENATOR HENRY MELLO .... 1 

Background and Experience 2 

Questions by SENATOR PETRIS re: 

Decision to Demolish California Museum of 

Science and Industry Building 6 

Violation of Governor ' s Executive Order 

regarding Historical Buildings 8 

State Architect ' s Violation of Statute 

regarding Bidding Requirements 9 

Statement by CHAIRMAN LOCKYER re: 

State Architect's Lack of Proper Bidding 

Procedure caused Controversy during Budget 

Process 10 

Nomination Creates Problem of Balance between 
Wonderful Person and Terrible Policies 11 

Questions by CHAIRMAN LOCKYER re: 

Office of Insurance Advisor 11 

Department of Fair Employment and Housing 

Remedies Appear to Side with Business 13 

Shift in Affirmative Action Goals 15 

Position on Initiative regarding Affirmative 

Action Efforts 16 

Thoughts about Department of General 

Services 17 

Questions by SENATOR AYALA re: 

Record Keeping Problems at General Services ... 17 

Auditor ' s Report on General Services 18 



IV 



INDEX ( Continued 1 

Questions by CHAIRMAN LOCKYER re: 

Meaning of "Realignment" with Respect to 

Department of General Services 18 

Hardest Decision during Tenure with Agency .... 19 

Building Standards Commission 19 

Department of Consumer Affairs ' s Opposition 

to Lemon Law Bill 21 

Questions by SENATOR PETRIS re: 

Status of Budget of State Historic Safety Board . 22 

Contradiction in Budget Language regarding 

Management Review of State Architect's Office . . 24 

Budget Planning with Governor 25 

Auditor ' s Reports Critical of Management of 

Museum Board 26 

Lack of Legal Foundation for Actions Taken 
regarding California Museum of Science and 
Industry 27 

Priorities with Respect to Historic Safety 

Board 28 

Need for Governor to Transfer Spouse to Position 

out of Agency's Jurisdiction 29 

Questions by CHAIRMAN LOCKYER re: 

Office of Insurance Advisor 30 

Statement by SENATOR PETRIS re: 

Renew Determination to Salvage Position on 

Historic Safety Board 31 

Questions by SENATOR AYALA re: 

Appropriateness of Regulatory Agency Imposing 

Statewide Regulations which Were Twice 

Rejected by Legislature 32 

What Was Emergency that Caused Adoption of 

Regulations 32 



INDEX (Continued) 

Statement by CHAIRMAN LOCKYER re: 

Committee ' s Intent to Keep Confirmation 

under Submission until December 34 

Discussion 35 

DEAN R. DUNPHY, Secretary 

Business, Transportation and Housing Agency 36 

Background and Experience 36 

Questions by SENATOR AYALA re: 

Back-up Plans for Funding Earthquake Programs 

in Light of Bond Failure last June 38 

Issuance of Bonds versus Increase in Sales Tax 

to Fund Projects 39 

Statements by SENATOR KOPP re: 

Funding Deficiency for Seismic Retrofitting ... 44 

Questions by SENATOR KOPP re: 

Advocacy of Substituting Vehicle Mile Tax .... 44 

Seismic Safety Retrofit of Toll Bridges 46 

Budget Agreement to Appropriate Money 

into State Highway Account 46 

Reversal of Governor's Agreement 47 

Improper Use of Toll Bridge Revenue Sub- 
Account to Seismically Retrofit 48 

Double-Taxing Motorists Who Use Toll Bridges ... 49 

Position on Bill to Sever Transportation as 

Separate Agency 51 

Questions by SENATOR PETRIS re: 

Status of Completion of Cypress Freeway in 

Oakland 52 

Maintenance on 880 54 

Accomplishment of Hiring Goals 55 



IV 



10 
11 
12 



14 



20 
21 
22 
23 
24 
25 
26 
27 
28 



INDEX ( Continued) 
Questions by CHAIRMAN LOCKYER re: 



Meaning of "Realignment" with Respect to 

Department of General Services 18 



Hardest Decision during Tenure with Agency .... 19 
Building Standards Commission 19 



4 
5 
6 

Department of Consumer Affairs *s Opposition 

7 to Lemon Law Bill 21 

8 Questions by SENATOR PETRIS re: 

9 Status of Budget of State Historic Safety Board . 22 



Contradiction in Budget Language regarding 

Management Review of State Architect's Office . . 24 

Budget Planning with Governor 25 



Auditor ' s Reports Critical of Management of 
13 Museum Board 26 



Lack of Legal Foundation for Actions Taken 
regarding California Museum of Science and 
15 Industry 27 



Priorities with Respect to Historic Safety 

Board 28 

Need for Governor to Transfer Spouse to Position 

out of Agency's Jurisdiction 29 



16 
17 
18 

19 Questions by CHAIRMAN LOCKYER re: 

Office of Insurance Advisor 30 

Statement by SENATOR PETRIS re: 



Renew Determination to Salvage Position on 

Historic Safety Board 31 

Questions by SENATOR AYALA re: 

Appropriateness of Regulatory Agency Imposing 

Statewide Regulations which Were Twice 

Rejected by Legislature 32 

What Was Emergency that Caused Adoption of 

Regulations 32 



P-R-O-C-E-E-D-I-N-G-S 
— ooOoo — 

CHAIRMAN LOCKYER: We have Senator Mello present, so 
perhaps, if it's okay with the Committee, we'll start with my 
Majority Leader. 

SENATOR MELLO: Thank you very much, Mr. Chairman and 
Members . 

I'm here on behalf of a good friend and a fine person 
that I've come to know and respect a lot, and she's up for 
confirmation today for the Secretary of State and Consumer 
Affairs. 

I was aware about two weeks ago that her 
confirmation was pending before the Rules Committee, and I was 
advised that she was not sleeping well, and not eating well, and 
kind of nervous about it. That's to be expected because people 
wait with some apprehension about coming before this very 
distinguished Rules Committee. 

So, I felt I would write a letter, which I did, and 
I'd come here personally to just introduce her. 

We became acquainted when she was on the California 
Art Council Board of Directors, and she did a tremendous job 
there. Later, she became the Director of the California Art 
Council and served at that position until the Governor selected 
her to be the Secretary of State and Consumer Affairs. 

During that period of time, as you know, many of our 
colleagues, in fact, don't believe in arts or the Art Council, 
and there were many runs made at the budget and at the programs 
themselves, especially from the other house. I saw the great 



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commitment that Joanne Kozberg has and her understanding of the 
issues, and her willingness to really fight for what she 
believes in, and also work closely with both the Legislature and 
the Governor ' s Office . 

So, I just have a tremendous respect for her. So, I 
6 ; wanted to come here and say these brief words and urge the Rules 
Committee to confirm her because I think she ' s an excellent 

8 choice to head this very important agency in the state. 

9 Thank you for letting me appear. I know Joanne will 
do a great job once she's confirmed. 

CHAIRMAN LOCKYER: Thank you, Senator. It's always a 
pleasure to have you with us . 

It looks like you maybe have a statement to open 

14 with. 

15 MS. KOZBERG: I would like to. 

16 Mr. Chairman and Members, since December of last 
year, I served the people of California as Secretary of State 

18 and Consumer Services. Between the Northridge earthquake and 

19 the state's continuing budget shortfalls, my agency, like the 

20 rest of state government, has been asked to be innovative, 

i' 

21 J, resourceful, and above all, make government work harder and 

smarter . 

Barely six weeks after I was sworn in, the Northridge 

earthquake ushered in my first opportunity to make a difference. 
25 The temblor hit Southern California and knocked out schools for 

thousands of children, and school districts from Simi Valley to 

Santa Monica were forced to cope with damaged classrooms and 
28 closed schools. 



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The Office of Local Assistance, part of the 
Department of General Services, is charged with constructing and 
leasing portable classrooms for school districts. Before the 
Northridge earthquake, we filled the requests for portable 
classrooms in about ten weeks. After the quake, we developed a 
radically streamlined process and got the first portables to the 
schools in just ten days. 

We made it clear that we would meet with anyone, 
anywhere, at any time if it meant that the children and teachers 
got the classrooms they needed without red tape and in record 
time. With the help of a lot of dedicated employees, working 
nights and weekends, we succeeded. 

The earthquake also meant that we had to mobilize the 
Department of Consumer Affairs and the Contractors State License 
Board to get timely and accurate information out to consumers 
faced with the monumental task of rebuilding their homes and 
businesses. Over cable television and at community forums 
throughout Southern California, we were able to quickly get the 
people the information they needed on how to access government, 
and to get educated about their rights. 

Reaching out to the consumer did not begin nor end 
with the Northridge quake. We have been working closely with 
professional boards within the Department of Consumer Affairs to 
continually educate them about their responsibility to protect 
consumers and police their industries . That is why we support 
Senator McCorquodale ' s sunset bill, SB 2036, which would create 
a process for jointly reviewing the effectiveness of consumer 
boards and reauthorizing only the ones that justify their 



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existence. 

I have chaired hearings around California, as called 
for by Senator Craven, to lay the groundwork for a program to 
protect consumers and to establish professional standards for 
the auto body industry. On behalf of Californians, I've also 
lobbied the Congress and the U.S. Department of Agriculture 
concerning anti-consumer practices by the federal government 
which allow poultry products to be sold in California as fresh, 
even though they've been previously frozen. 

I believe strongly in the power of government to do 
good. But I also believe strongly, as I have since my days as a 
CORO fellow and then its executive director, that government can 
only do good work by being inclusive, by proactively reaching 
out to people, to diverse constituencies, and by leveraging 



15 j public and private resources to create mass and depth. 



I believe in teamwork. One result of that teamwork 
is the report issued in April by the Division of the State 
Architect, addressing the need for seismic safety improvements 

19 to state buildings. In December, soon after I was appointed, we 

20 developed an interagency team to speed the completion of the 

21 seismic safety surveys by the State Architect's Office, and 

22 provide a comprehensive spending plan for repair of those 
buildings. 

We completed the report in just four months, and with 
the help of Senator Torres and his staff, folded the spending 
recommendations into Senate Bill 747, currently awaiting action 
in Assembly Ways and Means . 

I am currently working to implement Executive Order 



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W-93-94, creating the California Information Technology Council. 
This council, bipartisan in nature, is designed to get input 

3 from experts in the private and public sector to improve the 

4 state's use of information technology, make government 

5 information more accessible, and educate our children. 
That sense of reaching out also describes the efforts 

of our asset management program. Working with cities and 

8 redevelopment agencies in Oakland, San Francisco, Los Angeles, 

9 and San Bernardino and Riverside, we've been able to develop 
10 plans for new office buildings which create jobs, eliminate 
n J costly and multiple leases, and make the state government more 

accessible, while at the same time, saving scarce tax resources. 
These facilities have met with great community acceptance. In 
Los Angeles, our plans to revitalize the historic downtown core 

15 have won major local and national awards. 

16 The State and Consumer Services Agency has a vast 
menu of issues. I intend to do my best to make sure that I 
respond, and that the people who report to me respond in an 
open, inclusive, effective manner to you, the Legislature, and 

20 to the people of California. 

21 Thank you. 

22 CHAIRMAN LOCKYER: Thank you very much. 

23 Is there anyone in the audience, first of all, that 
would wish to comment, either for or against the nomination? 
Seeing none other than Senator Mello, let me ask if there are 
Members that have any questions? I have numerous, but we'll get 

27 i to those. 

98 ! 

Z8 Senator Petris . 



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1 SENATOR PETRIS: I'm going to ask a few questions 

about historic preservation policies. I've been active in that 

3 for years and am concerned about some issues that have arisen in 

4 the last couple of years . 

5 One of them is the California Museum of Science and 

6 Industry. You've probably heard more about that than you care 
to at this point, and there is a dispute going on, and there are 
some Members who differ with each other within the Senate. 

9 What I'm concerned about is that it's pretty clear 

10 from the record, as indicated by Senator Boatwright in his 
•i budget hearings and also by Senator Alquist as Chairman of the 

12 overall Budget Committee, in addition to what I've been doing, 

13 that the decision made some way or other to demolish a couple of 
1^ buildings, both of which are considered valuable historic 

15 buildings — one is the museum building itself, the other is the 

16 Ahmanson building; there are a couple of them — without going 

17 through the proper process. That's what troubles me. 

18 We have two separate agencies created by statute to 
review matters of that kind. One is the Historic — I keep 

forgetting the titles, but I think you know — the State 

1 
21 Historic Preservation Board is one which has a staff, an 

I 

I officer, that's supposed to be monitoring things of this sort, 
! and make recommendations, and review all requests for demolition 

or even alteration of a building that's been declared to be a 

historic one. That's the key one, and the other one I'll come 

up with shortly. 

They were never consulted, or rather, petitioned is 

the more proper word, to review the proposal with respect to the 



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Museum. And even after complaints were made from within the 
Legislature that that policy ought to be followed, it simply 
wasn't. They just went full bore ahead. 

I think now we're still in the process of soliciting 
bids for the demolition of those buildings; is that correct? 

MS. KOZBERG: Senator, I may be the one person that 
is not knowledgeable about the Museum of Science and Industry. 

As you may be aware, and I hope I have made everyone 

aware, that Roger Kozberg, my husband, was appointed by the 

i 
Governor in September, 1991, to the Board of the Museum of 

Science and Industry. 

When I took this job, I went to the attorney, of 

13 course, before taking the job, to see if there was any potential 

14 conflict. There is no conflict of interest because conflict of 

15 interest is an economic interest law and he is a volunteer. 

16 i However, because of perception, I have recused myself from 

17 dealing with the Museum of Science and Industry, as well as the 

18 Coliseum. ( I have delegated the Museum of Science and Industry 

19 to the Undersecretary, and the Coliseum issues are being handled 

20 L by the Secretary of Resources. 

21 i! SENATOR PETRIS: I'm aware of that, but it's still 

the ultimate responsibility of your office to see that the law 

23 is followed. And regardless of who is appointed to take over 

24 for you, the law just hasn't been followed, and ultimately that 

25 bounces back on you. 

26 I suppose it ' s better to avoid the perception of a 

i 

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27 j| conflict than to insist that you stay in it and maybe have a 

i 1 

zo i marital conflict because your husband may want to go in one 



8 

direction and you — 

MS. KOZBERG: That happens often in our family. 

SENATOR PETRIS: — and you may want to go in another 
direction. I don't know what his position has been in this 
conflict with regard to hanging on to that Museum and preserving 



6 it, or at least going through the proper committees — not 



committees, but agencies of the state. 

In addition to that, the Governor himself issued an 

9 j Executive Order calling on every state agency to have as a high 

ij 
10 |l priority the notion of being aware and sensitive to the history 

of a particular building and safeguarding it. It appears that 

that order was also violated by the people who ran 

helter-skelter into the notion of knocking these buildings down. 

Now, I don't know where they are at the present time, 
and I guess you're not on top of it. 

MS. KOZBERG: I can make sure that the correct people 
come to see you. 

SENATOR PETRIS: Well, I've talked to some. I had a 
long meeting, a couple hours, with the deputy that you 
mentioned. She came to the office with one or two others in a 
21 good faith effort to try to iron this out, but it hasn't been 



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ironed out. 

MS. KOZBERG: If you have concerns about my 
commitment to historic preservation, as a former Director of the 
California Arts Council, I do want you to know that I feel that 
architecture is part of our cultural heritage, and intend to do 
as I have done in the past, everything to maintain the 
historical preservation component in whatever we do. 



1 SENATOR PETRIS: Well, it may mean you'll have to 

unrecuse yourself to step and see that the agency does what it's 

3 supposed to do. 

4 We have a State Historic Preservation Office, and we 

5 have a State Historic Building Safety Board, which includes 

6 J seismic problems and others, neither one of which was petitioned 

by who ever made the decision under your roof, maybe way down 
below your roof. It might have been several floors, for all I 



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9 know. But the problem is, you're the one ultimately running the 



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show, and to this date they haven't done that. 

They've had a lot of talks, phone calls, and some 
talks. But as far as I know, to this date they have not 

13 formally requested permission to proceed with this demolition. 

14 So, if you could look into it to that extent for the 
ii purpose of coming down on the side of preservation and obeying 

the statute, that would be very helpful, and I would appreciate 
some feedback from you on that. 

MS. KOZBERG: I shall certainly do so. 

SENATOR PETRIS: The other thing is the State 
Architect made a very serious violation in completely ignoring 
the statute with respect to bidding requirements for minorities, 
and women, and veterans, and the disabled, and went direct to 
somebody who happened to be a close, personal friend over a 
period of years. He may be well qualified, but it just doesn't 
look good when you bypass all the normal bidding procedures and 
pick an old friend. 

That should have been challenged, of course, by 
somebody in your shop early on. 



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Now, the last question has to do with — 

CHAIRMAN LOCKYER: If I may interrupt on that point. 

SENATOR PETRIS: Yes. 

CHAIRMAN LOCKYER: When the department or agency 
fails to enforce the law with respect to the State Architect ' s 
lack of judgment, or maybe worse, it causes enormous problems 
for us . It ' s very hard every year to pull together the budget 
votes, the two-thirds votes, and issues like that were so 
provocative with five Members of the Senate that it created 
enormous controversy: with Boatwright and Kopp being 
particularly exercised about the improprieties; Senator Petris 
concerned about the historic preservation issues; Watson and 
Hughes concerned about the site and their district issues . It 
was a mess . 

And a lot of it, frankly, was the result of out-of- 
control administrators, or what appeared, that inflamed the 
whole problem. And more than maybe any other single issue, it 
was the one that made the budget difficult for us this year. 



19 Pardon me, Senator. 



If we could take a five-minute break, we can all get 



21 jj on the roll so they're able to substitute the roll without us. 



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Stay just where you are, or do whatever you want, but 
we'll be back in five minutes. 

[Thereupon a brief recess was taken. ] 

CHAIRMAN LOCKYER: There's a number of areas I'd be 
interested in hearing your response to, but to be fair, I want 
to tell you kind of where I'm headed. 

Your nomination probably raises for me the clearest 



11 

example of wonderful person, terrible policies. And I don't 
know how to balance that. 

Now that Senator Petris is back, however, I don't 
want to interrupt you. 

SENATOR PETRIS: I need to catch my breath first. 

CHAIRMAN LOCKYER: All right, you catch yours. 

Let's just go down the list. For me, they are Office 
of Insurance Advisor, Fair Employment and Housing, General 
Service, Personnel Board, you've heard this issue, and then just 
sort of the Balkanization of that place, and all the boards and 
commissions that seem to be often kind of off of their own and 
out of control . And I guess I would add in that category the 
lemon law as one specific consumer issue. 

Anyhow, the Office of Insurance Advisor is, I guess, 
technically under you. 

MS. KOZBERG: It reports directly to the Governor. 
It's housed within the Agency, but it is the advisor directly to 
the Governor. 

CHAIRMAN LOCKYER: What does that mean? That you 
don't really have any supervisory role? 

MS. KOZBERG: Again, my husband is an insurance 
broker, and I have a letter of recusal in that I do not handle 
the insurance issues . 

CHAIRMAN LOCKYER: But that persons does. 

MS. KOZBERG: But that person does, and again, Anne 
Sheehan, the Undersecretary, handles all insurance-related 
issues . 

CHAIRMAN LOCKYER: Who's the Undersecretary? 



12 

1 MS. KOZBERG: Anne Sheehan. 

2 CHAIRMAN LOCKYER: But that's one of your deputies. 

3 MS. KOZBERG: Yes, she is the Undersecretary — 

4 CHAIRMAN LOCKYER: She works for you. 

5 MS. KOZBERG: Yes, that's correct. 
(j 

6 CHAIRMAN LOCKYER: I guess I don't quite understand 

7 i what would happen. 
If an insurance issue comes up, and there's a lot of 

9 them these days in health insurance, and HMOs versus docs, and 



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different kinds of insurance, and auto, and earthquake. I mean, 

the list goes on and on. 

You basically don't get involved in those debates? 
13 is that what you're saying? 
'4 MS. KOZBERG: No, and the Insurance Advisor works 

directly with the Governor's Office on a number of these issues. 



15 



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16 As we're all aware, the industry is regulated through the 
Department of Insurance. 

CHAIRMAN LOCKYER: Right, but in terms of having 
policy — 

MS. KOZBERG: I have no policy input. 

CHAIRMAN LOCKYER: But your Undersecretary, then, 

22 does or doesn't? 

23 MS. KOZBERG: Basically signs off, but that Insurance 

24 Advisor really responds directly to the Governor's Office. 
I 

25 CHAIRMAN LOCKYER: But you have some role with the 

26 ! Undersecretary, I guess. No? What does the Undersecretary do? 

27 MS. KOZBERG: It's really basically a sign-off and 

i] 

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delivered. 



CHAIRMAN LOCKYER: So, if they want, like, a position 
on a bill, or something, is that where this would come up? 

MS. KOZBERG: Yes, but it is wholly — they do their 
own analysis. It is not in our Agency. We do not do the 
6 analysis. 

•7 ii 

CHAIRMAN LOCKYER: One of the things we found in this 
budget cycle is that apparently there are a number of exempt 
positions scattered around through numerous agencies that are, 
in effect, the Governor's staff. This appears to have been 
something devised by Colby Olson, or whomever. I don't know 
where it started. It seems to be happening currently quite a 
bit, where governors are afraid to be criticized for an 
expansion of their staff. So, they way they do it is, they seed 

15 them all around, but they really work for the Governor and often 

16 are located in his suite. 

That sounds sort of like the Insurance Adviser's 
role. I don't mean my political take on it, but that sounds 
like one of those kinds of things. I'll just say it; you don't 
have to respond. 

Fair Employment and Housing, there have been disputes 
in recent years about appropriate remedies that are brought in 
an administrative forum. Many of us were disappointed that the 



24 !: Department seemed to fall more on the side of a business 



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perspective rather than championing the concerns of the 
individual who would be bringing a discrimination complaint. 

Has that debate occurred at all during your tenure? 

MS. KOZBERG: We have done an entire overhaul of that 



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Department: going to an 800 number; making sure that people are 
promptly responded to. And it's something that I'm particularly 
interested in, as I worked for the NAACP Legal Defense Fund, and 
I think that it really helped sensitize me and gave me a 
familiarity with issues that would come under that department. 
6 CHAIRMAN LOCKYER: When did you do that? 

MS. KOZBERG: In 1976. 

CHAIRMAN LOCKYER: What were you doing? 

MS. KOZBERG: I was coordinating cases in Southern 
California and also helping with the fundraising. 

CHAIRMAN LOCKYER: Well, the remedy issue, though, I 
mean, you've done, apparently, the structural reform. There may 
be a substantive issue about what remedies are available to 
people that probably predates you. I think this is a year or 

15 two ago that we were in the midst of all of these disputes . 

16 But it was very disappointing to have the Commission, 

17 the Department, the Secretary all urging us to scale down the 

18 remedies that were available to injured parties. 

19 MS. KOZBERG: I will look into that immediately. 

CHAIRMAN LOCKYER: That hasn't, I guess, come up 

21 during your time. 

22 MS. KOZBERG: No, it has not, but I will look into 

23 ; it. 

CHAIRMAN LOCKYER: In FEH, they're very aware of that 



25 whole thing. 



Similar question: there have been affirmative action 
guidelines adopted by the Office of Compliance — that's 
probably not the exactly right title, but that's their job — 



15 

where they have to issue regulations with respect to state 
contractors and state employee workforce, working with Personnel 
Board and others . 

It's my understanding that there has fairly recently 
been a shift in the goals from trying to have, let's say, the 
state workforce achieve ethnic and gender diversity that 
reflects the labor force rather than the general population. 

It makes a big difference, obviously, especially in 
Hispanic employment, because Hispanics are the most under- 
represented group in state service. 

I think this is not a law. It's just an 
administrative decision that was made. I ask if it's familiar 
to you, or if you have any thoughts or ideas about the matter, 
that the guidelines were changed from the original goal of 
achieving employment levels that reflect the general population, 
and instead were changed to the labor force, which of course 
makes it much more Caucasian. 

Does that ring a bell at all? 

MS. KOZBERG: Not that specific issue, but I know 
right now the State Personnel Board is going through an analysis 
of the workforce. They've completed that, and you're absolutely 
correct, there is a deficiency in the Latino representation in 
state government. 

I'm aware that they are awaiting and will be voting 
on a report in the fall. I will get specifically involved in 
that. 

CHAIRMAN LOCKYER: You might ask the question as to 
what the target is. And I think the law permits either, it just 



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depends on how committed people want to be to those goals . 

One of the current debates in the Legislature, and I 
think it will ripen, it sounds like it's going to ripen into an 
initiative maybe next year, is a Constitutional amendment 
offered up by Assemblymember Richter, Senator Kopp, Senator 

6 J Campbell — and I don't know if there were others. I know those 

7 jj three were involved — which essentially prohibits state 
i 

8 |j affirmative action efforts based on gender, race, ethnicity. 

9 That's what it does, basically. 
I think the measure has died in the Legislature. I 



n I believe it's going on now to the initiative situation. 

12 Do you have any views about that? Did your Agency or 

13 departments ever express opinions about the matter, or take 

14 positions on the issue? 

15 MS. KOZBERG: I'm not aware that we have taken a 

16 position on it. 

17 Right now the law speaks very clearly, and we are 

18 trying to do our best and exceed the goals. 

19 CHAIRMAN LOCKYER: Well, this would stop you from 

20 doing that, and it sounds like you may not embrace that 

21 jj" approach. 

MS. KOZBERG: I think California's strength is its 

23 diversity. 

24 CHAIRMAN LOCKYER: Me, too. 

25 General Services, shifting and going down my list. 

26 Senator, if you want to resume, you can at any time. 

27 Just pop in. 

28 Let me mention first, we've had a discussion as to 



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the effort to rebuild the core area, in downtown L.A. I'm 
delighted by your commitment and enthusiasm about that 
undertaking and strongly agree about the need and the energy to 
which your Agency and department is bringing to that task. 

General Services has been the subject of numerous 
audit reports and .criticisms over the years that suggest — I'll 

7 I over- summarize this — that it's just this sort of big 

8 \ bureaucracy out of control. 

I'd appreciate any reflections and thoughts you may 
have about the situation. 



11 MS. KOZBERGs There is a lot to General Services. As 



you know, there are 25 different divisions. And a lot of the 
functions that — like our Agency, are dissimilar. 

I am aware and am taking a very good look at 
alignment. I think one of my strengths is being able to take 
a look and see how systems work, how people are communicating. 
And I can see a number of suggestions coming forward how we can 
improve our service. 

General Services has an extremely hard task, and it - 
is a control agency. I hope to add value to how it meets its 
needs, because we are all clients of that agency. And having 
been a director of a state agency, I'm aware of how to work with 



23 General Services from the customer's side. 

24 SENATOR AYALA: On that point, the State Auditor has 

25 



surfaced a number of problems, record keeping problems, with the 
Department of General Services. 

What are we doing about that in General Services? 

MS. KOZBERG: Well, if I could be specific to the 



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procurement issue, we have what we call Procurement 2000, and we 
are totally taking a look, and we're going to re-engineer how we 
procure so that we can give stronger access to small business, 
minority and women businesses, taking a look at how we are 
integrating our uses with the military bases that are closing, 
looking at electronic commerce. 

We are — we know it needs improvement, and we are 
working on that. 

SENATOR AYALA: You are paying attention to the 
Auditor's report. We're just not ignoring it? 

MS. KOZBERG: No, we are working on it right now. 
And the procurement area in particular is going full thrust in 
taking a look at its systems, and how it is or is not 
functioning optimally. 

SENATOR AYALA: Thank you, Mr. Chairman. 

16 CHAIRMAN LOCKYER: Are the kiosks under General 

17 Services? 

MS. KOZBERG: No, those are under Health and Welfare. 
CHAIRMAN LOCKYER: Aren't you lucky. 

[Laughter. ] 
2i CHAIRMAN LOCKYER: General Services, you have all 

this, and when you say "realignment", what do you mean? What's 

23 I being thought about? 

24 MS. KOZBERG: Well, again, taking a look at — we'll 
use procurement as the example. 

There is a general frustration. There's a 
frustration on the part of the people who try and procure and 
the small vendors. So what we're trying to do is get maximum 



19 

input from the entire community and have competitively gone out 
and bid to bring a private sector consultant firm in to take a 
look at how state government could operate better, so that we 
really are taking a look. 

I hope — am I answering your question? 

CHAIRMAN LOCKYER: Yes. Are you talking about — 

MS. KOZBERG: Or real estate, for example, needs to 
jj 

8 i be, I think, thoroughly looked at and come into an alignment. 

9 We are doing that now, but I think that there are more 



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efficiencies that we could be undertaking. 

CHAIRMAN LOCKYER: So alignment in your mind means 
making it more efficient? 

MS. KOZBERG: Well, it's making it more 
user-friendly, more efficient, more economical; a lot of 
different issues. 

CHAIRMAN LOCKYER: What's been the hardest — you've 
been there seven months now? 

MS. KOZBERG: Eight months. 

19 CHAIRMAN LOCKYER: What's been the hardest decision 

20 ; so far? 



MS. KOZBERG: The toughest issue that I think I've 
dealt with because of the emotion that ' s involved is the pool 
barrier issue. 

CHAIRMAN LOCKYER: Building Standards, I guess, 
adopted rules. I don't know how much actual ability you have to 
influence their determinations. 

Are they sort of off on their own sometimes? 

MS. KOZBERG: If I could give you the chronology of 



20 

that issue, because that also brought up a number of other 
issues, too, that I think are very serious issues for the state. 

When I came into office, there had already been 
passed emergency regulations that brought up an appendix item, 
which is an optional item, into becoming a mandated program of 
the state, and that we had to go with that particular regulation 
| for pool barriers . 

And the issue is that it's not perimeter fencing. 
This is fencing that you would have to have four-sided fencing, 
and where the house is the fourth side, there would have to be 
alarms on the doors and windows. That was brought forward by 
Housing and Community Development. It passed in September. 

I came into office in December. After the different 
constituencies came and spoke to me, I first of all believe that 
emergency regulations should be emergency regulations, and that 
we should have the maximum amount of public input up-front on 
all decisions that are made. 

In this instance, we held two hearings in Northern 
| and Southern California. They were all-day hearings, and they 
were extremely emotional hearings. So, that is a piece that was 
the past. 

There was a bill that was concurrently moving through 
the Legislature, and on the day that the Building Standards 
Commission took its vote, the barrier bill that was facing the 
Legislature, which did have distinctions from our regulation, 
passed out of Senate Appropriations. It later died on the Floor 
of the Senate. 

CHAIRMAN LOCKYER: Right. 



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26 



MS. KOZBERG: What we have done since is brought all 
interested parties together to sit around the table. 

CHAIRMAN LOCKYER: Did you have a position on the 
bill? 

5 MS. KOZBERG: On the bill, we had an oppose position 

6 on the bill. 
CHAIRMAN LOCKYER: How about lemon law, while I think 

of positions on bills? There's been, of course, a proposal to 
strengthen it in a variety of ways . 

It seems peculiar to me to have the agency most 
uniquely responsible for representing consumer concerns to be 
opposed to that. 

13 MS. KOZBERG: I have seen the comment done by the 

14 Department of Consumer Affairs, and yes, they do have an oppose 

15 position. 

16 I remain open. The session is not over. I do know 

17 J that there is a consensus that we can improve the lemon law, and 
we remain open to doing that. We know it is an issue with the 
public. 

CHAIRMAN LOCKYER: Well, sort of the heart of the 



21 dispute, but there are numerous ones, involves how aggravating 

22 : it is for a consumer to get something fixed or changed or 

23 replaced. And when the dispute resolution programs in 

I 

24 California are basically ones run by the automobile companies, 

25 Jj it starts being unfair. 

Most states now have shifted to department-run 



programs, but now we have a department under you that's saying, 



28 



"We don't want to do it. We want the industry to continue to 



22 

run these programs," where things happen like people aren't even 
notified that their arbitration is occurring. They aren't even 
told, the consumer. They go there, and there's a conflict of 
testimony. The consumer finds out about it, and they say, 
"Well, I'd like a little more time to get my records that will 
refute the other argument." They say, "No, too bad." 

I mean, it's just horrible, the things that go on. 



8 And to have the Department of Consumer Affairs being an 



9 
10 
ll 
12 

13 
14 

15 
16 

17 
18 



aggressive advocate against consumer is distressing. 

MS. KOZBERG: I have put in a call to Harry Snider, 
who is the West Coast head of Consumers Union. 

As I said, I remain and the Agency remains very open. 
We will sit down with anyone anytime. We realize that there is 
room for improvement . 

CHAIRMAN LOCKYER: So, you're open, but the 
Department under you has a position. How does that occur? Do 
they all do that, this whole Balkanized place? 

MS. KOZBERG: In this particular instance, the 



19 j! Director just came back from a vacation. I saw his position on 



20 
21 

22 
23 
24 
25 
26 
27 
28 



Monday . 

I intend to sit down with the Director, and he will 
be, hopefully, a member who sits around the table, too. 

CHAIRMAN LOCKYER: Senator Petris, maybe I can shift 
to you . 

SENATOR PETRIS: What's the current status of the 
budget of the State Historic Safety Board? I understand during 
conference, it was totally eliminated. Then I heard there was 
some effort to put it back, but I'm not up to date on that. 



23 

MS. KOZBERG: It was eliminated in conference; 
$831,000 were taken out of the State Architect's budget. There 
is very little General Fund money in the State Architect's 
budget . 

The only two programs that we had were the Toxics 
Program, which is a federally mandated program, and the State 
Historic Building Safety Board person. 

SENATOR PETRIS: Is he under the Architect? 

MS. KOZBERG: He is under the State Architect. 

SENATOR PETRIS: He's not under General Services? 

MS. KOZBERG: Again, General Services is very large. 
The State Architect is off iced within General Services. 

We immediately sat down and worked with the State 
Historic Preservation officer. We are working with Finance, 
with General Services. We think that we have a remedy for this 
year. We are going out with a number of federal grants that we 
think we have a very good opportunity to have on a matching 
basis. 

We consider that function very important, especially 
as we are reviewing our seismic codes, and the historic seismic 
code has not been updated in ten years . 

So, we have preserved that function, that person, who 
will be working on a number of very important issues this year. 

SENATOR PETRIS: Do you expect to get enough from the 
feds to make up the loss? 

;l 

MS. KOZBERG: We think we will. There's an 

I! indication that FEMA has mitigation money. In addition, through 

II 

i; 

ji the National Parks Service, there is money, again, to do 



24 

specific work that's seismically related, and we have the grants 
going in now. 

SENATOR PETRIS: Well, there seems to be a 
contradiction in the budget. They eliminated the money you 
indicated, thereby eliminating the functions, and yet they're 
requiring the Bureau of State Audits to conduct a management 
review of the Office of the State Architect to evaluate the 
degree to which the State Architect provides — not provided — 
but provides oversight, coordination and leadership in meeting 
the state's property management goals, particularly to obtain 
the following: one, compliance with the State Contracts Code 
relating to bidding, that we've been talking about; two, 
requirements for minority, women, and disabled veterans, and 
that's specific to the issues that were discussed before, 
veteran-owned business enterprises; and three, coordination of 
local government development plans. 

I don't understand how this can be done — to observe 
and give a critique on how they're doing these things — when 
they're not doing anything. Can you help me with that? 

MS. KOZBERG: Are we talking in reference to the 
Historic Safety Board in this particular instance? 

SENATOR PETRIS: Yes. 

MS. KOZBERG: Well, what we have done — 

SENATOR PETRIS: We're talking about the State 
Architect specifically, not the Board in this instance. They've 
both been wiped out. This provision relates to the Architect. 

This may have been drafted before the cuts were made, 
but it is in the budget as of now for next year. 



1 

2 
3 
4 
5 
6 
7 
8 
9 
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12 
13 
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18 



25 



MS. KOZBERG: Well, the position that was taken in 
the budget cut was the position for the Historic Safety Board 
representative. And that is where the cut came. 

What we have done is, we have maintained that 
position. As a matter of fact, we're trying to even integrate 
it more closely into the workings of the Department. 

SENATOR PETRIS: And how about the State Architect? 
That ' s the federal grant you ' re seeking? 

MS. KOZBERG: Well, the federal grant we're seeking 
is to help do some of the work, the focus of the work, the 



11 mitigation work and the code work that would be done. 



I do know that the Historic Board position we've got 
to treat long-term and take a good look at how, you know, we're 
going to maintain this, because I understand that this is not 
the first year it has come up in the budget. 

SENATOR PETRIS: Do you confer with the Governor on 



17 planning the budget for the following year? 



i! 



MS. KOZBERG: Yes, we give input. 



19 SENATOR PETRIS: You'll have an opportunity to make 



20 your recommendation on the budget? 

21 MS. KOZBERG: Yes, and I will sit down with all the 
affected parties to try and work out a long-term solution. 

23 SENATOR PETRIS: For the next budget, we'll try to 

24 put it back in. 

25 MS. KOZBERG: Actually, we are looking for — and it 

26 j will parallel the budget cycle as we go forward — a cure by 

27 | December. 

28 SENATOR PETRIS: You understand, if they're put out 



11 

12 



14 
15 
16 
17 



20 
21 
22 
23 
24 
25 
26 
27 



26 

of business, then there's just no agency or effort at all to 
carry out their very important function. I guess that's why 
you're trying to restore it. 

MS. KOZBERG: Absolutely, and historic — the 
preservation officer that resides within Resources, Cheralyn 
Woddell, also feels that it's extremely important to save. She 
is sharing a federal grant that she has so that the committee 
can travel to do their work. 

SENATOR PETRIS: I think I read that somewhere, about 



10 the travel. 



Are you familiar with the reports of the Auditor, the 
two separate reports? They're very critical of the management 



13 of the Museum Board over the past year or two. 



MS. KOZBERG: I am not. 

SENATOR PETRIS: I think some effort should be made 
to supply you with copies, even though you don't want to deal 
with that directly. Somebody in your shop should be. 

18 MS. KOZBERG: I will make sure that I have copies. 

19 SENATOR PETRIS: If you have any problem, let me know 
and I'll get them for you. 

We also have, going back now to the legality, which 
I'm concerned about, we have an Attorney General's opinion that 
say they must comply with the law and petition these two 
separate agencies. Legislative Counsel also has a similar 
opinion. 

You may not be aware of those, either. Perhaps I 
should have those sent to you. 






28 MS. KOZBERG: I would appreciate that, though I'm 



27 

sure the Undersecretary has all the documentation. 

SENATOR PETRIS: As I said, I met with her for a 
couple of hours. We didn't come to any agreement; it kind of 
fizzled out. But at least we tried. I was concentrating on 
these same issues. 

Now, was she appointed after the decision was made on 
the Museum or before? 

MS. KOZBERG: The decision — 

SENATOR PETRIS: To go ahead with the demolition. 

MS. KOZBERG: I believe that — I'm not quite sure. 
I know that the bill was signed in July of 1991. I don't know 
whether the plans were fully fleshed out at that point in time 
or not. 

SENATOR PETRIS: Which bill is that? The Hughes 
bill? 

MS. KOZBERG: Yes. 

SENATOR PETRIS: Then part of that mix included 
turning over state property to the L.A. Unified School District. 
Are you familiar with that? 

MS. KOZBERG: In concept, I'm aware of the concept, 
but I do not know the specifics. 

SENATOR PETRIS : I ' d be interested in the legal 
foundation for that. I don't think there's any legal 
authorization. I don't think we passed any bill authorizing the 
transfer. You know, it may go to a good cause for a local 
school district. 

Part of the plan was to put a school in the Armory — 
the Armory ' s the other building I was trying to think of — and 



28 

have the L.A. Unified School District go in there. 

I don't know of any legislative authorization for 
that. I hope I'm mistaken. I hope maybe you'll be able to find 
it. 

Well, let me ask you, what are your goals now that 
you've run into this hornet's nest, too late to do an 
about-face, I suppose. What are your plans? What are your 
priorities with respect to carrying out your duties on this 
portion? 

I know Consumer Affairs covers a very big range. 
Senator Lockyer touched on parts of it. 

But with respect to these issues, what will you do? 

MS. KOZBERG: With respect to the Historic Safety 
Board? 

SENATOR PETRIS: Yes. 

MS. KOZBERG: I would, again, be happy, and even if 
you would convene, or we could jointly convene, to bring the 
group together so that we could help understand what their 
priorities are, what they want to accomplish, and see how we can 
match that up with the appropriate level of funding they need to 
carry out their goals . 

SENATOR PETRIS: I would welcome an opportunity to do 
that. 

On this Audit, the report is supposed to be made to 
the Joint Legislative Budget Committee and the fiscal committees 
by March 31 of next year, so there is a little time for all of 
i us that are interested to work on that. 

Now, on this recusal, I think it's honorable for you 



17 



20 



24 
25 
26 
27 
28 



29 

i 



to step down, but the Governor may have a problem of a married 

couple that is much too talented and whose services are highly 

desired, but I would hope he would arrange a transfer. Your 

very talented husband ought to be put in a different shop, and 

that'll relieve you totally. You don't have to be so cautious 

and hesitant. You ought to be free. You ought to have your 

hands free to do the job, and I think this inhibits you. 

Passing it on to the assistant really isn't the same thing. 

9 Perhaps I should speak to the Governor on that — 

L 
10 | MS. KOZBERG: I think that would be a wonderful idea. 

n SENATOR PETRIS: I'm sure he has so much confidence 

12 in him, with good cause, that a suitable assignment can be found 

13 that'll relieve you of this burden. 

14 MS. KOZBERG: Thank you. I cannot hire or fire my 

15 husband. 

16 SENATOR PETRIS: Yes, I understand. 

CHAIRMAN LOCKYER: Well, it's a new age. 

8 [Laughter.] 

9 MS. KOZBERG: But you might pass that on. That would 
be very nice. 

21 SENATOR PETRIS: Thanks, Mr. Chairman. 

22 CHAIRMAN LOCKYER: This might be a frustration that I 

23 have with the Insurance Advisor and the Governor, so it's 
perhaps entirely unfair to raise it in connection with your 
confirmation, but it does in my mind summarize three years of a 
relationship, or nonrelationship, with the executive officer. 

I worked for two years on insurance reform, auto, to 
try to find ways to save more than no-fault supposedly saves, 



7 
8 
9 
10 
11 
12 
13 



16 
17 
18 
19 
20 



30 

but avoiding arguments about personal responsibility and so on; 
doing fundamental change to the tort system. 

Two years' work, three actuaries, which is torture in 
itself, for hundreds of hours, hearings and hearings, and on and 
on. 



6 We did it. Probably saved about twice as much as 



no-fault saves. 

I couldn't get two minutes of the Governor's time to 
pitch it. I got a veto message that said, "Thank you very much. 
No- fault or nothing. " 

So, I guess that's really a complaint I have with the 
E.O. rather than those who work for him, but since the office of 
Insurance Advisor is technically in your shop, though it may not 

14 be under your wing, I mention it just because this seems to be 

15 i the appropriate place for us to unload all of our gripes of this 
sort. It doesn't necessitate any response at all, other than 
just to express some frustration at the lack of mutuality and 
inability to work together. 

SENATOR PETRIS: May I go back to this just for a 
minute, just to kind of re-emphasize that I'm trying to help 

21 you, actually. 

22 This is a statement from General Services, Chairman 

23 of the board reviewing some of the history here. The statement 
ia> says that in the Department of General Services, from which this 

|| comes, there's 69 structural engineers who review and inspect 
the work of the engineers and contractors involved in school 
construction. There are at least 22 project directors who 
monitor the work of paid outside consultants. There are 11 



26 

27 
28 



31 ! 

I 



professionals dedicated specifically to review access compliance 
for state preservation mandates and federal and state law. Yet, 
there's only one professional — one — assigned to educate, 
exhort, review, and ensure compliance with the state's 
historical building code. And that position's been eliminated, 
6 j! the one we ' ve been talking about . 

I just want to get that in better perspective to urge 
you to renew your determination to salvage it . I know you ' re 
trying. 

MS. KOZBERG: Senator, I feel very strongly about 
salvaging that, and I think you all saw the movie "Dave". Well, 
I rolled up my sleeves and went through every dollar in that 
budget to try and leverage the money. 

I am familiar with how to do grants, and so I'm more 
than willing to write those grants and participate myself in 
getting that board funded properly. But it does need a 
long-term solution. 

SENATOR PETRIS: Once you get it, I hope you'll keep 
an eye on the relapse on the part of the Architect in bypassing 
the other requirements with respect to veterans, disabled, 
racial and so forth requirements in the bidding process, so we 
can restore that and strengthen it. 

MS. KOZBERG: I do know that — 

SENATOR PETRIS: Especially in view of your work with 
the NAACP down south. 

MS. KOZBERG: And we do monitor every month, and I 
know that Mr. Lockwood has been very concerned, watching the 
numbers. We are ahead of goals. We can always do better. 



32 

SENATOR PETRIS: Well, the Architect was behind goal. 

Thank you. 

SENATOR AYALA: One question. 

CHAIRMAN LOCKYER: Senator. 

SENATOR AYALA: I'd like to revisit the pool fencing 

6 \ issue, with the Building Standards Commission adopting emergency 

I, 

regulations for the construction of barriers around swimming 
pools, and so forth. 

Do you believe it's appropriate for a regulatory 
agency to impose statewide regulations that have been rejected 
twice by the Legislature? 

MS. KOZBERG: Well, again, when the Commission voted, 
it voted the same day it passed out of Senate Appropriations, so 
that the legislative will at that moment was moving — that it 
was moving through. 

The bill was different than the regulation; however, 
it was amended as it was heard again, and now there are very 
large similarities between he bill and the regulations. 

SENATOR AYALA: What was the emergency that caused 
this to be adopted? 

MS. KOZBERG: I wasn't there at the time, but I will 
tell you that since I serve as Chair of the Building Standards 
Commission, we have gone into an education program, as you need 
with all commissions. You have a number of people that come, 
and they represent one phase or factor in an industry, or a 
consumer group, but they may not be aware of the open meeting 
laws. They also may not be totally familiar with the regulatory 
process . 



10 



22 



33 



You will find a well-educated Commission now, who 
understands the regulatory process and the responsibility in it. 

It is — the pool barrier regulations have gone out 
for public comment. They're due to vote again September 22nd. 

I am sure that what has happened in the Legislature 
will become part of what will form a final decision. And again, 
HCD that is the sponsor of these regulations . The Board hears 

8 the issue. 

9 SENATOR AYALA: I'm not sure if you're answering the 
question. 

n Do you think it's appropriate for regulatory agencies 

12 to impose these conditions when the Legislature rejected them 

13 twice? 

14 MS. KOZBERG: What happened — 

15 SENATOR AYALA: I know they're not the same. 

ji 

16 MS. KOZBERG: No, I hear what you're saying. 

17 I At the time we did this, and all parties indicated 

18 they would be willing to sit down and talk together, the bill 

19 p was moving through the Legislature, at the time we took the 

I 
|l 

20 vote. It was subsequent to the Commission's vote that the 

21 Senate voted down the bill. 

SENATOR AYALA : I'm not sure you answered my 

23 question. 

24 Do you think it ' s appropriate for them to do that , 
take action on some regulatory issue that the Legislature has — 

26 MS. KOZBERG: No, the Legislature is the final 

il 

27 authority. 

ij 

28 SENATOR AYALA: But if they defeated it twice, yet 



34 



l 

2 
3 

4 

5 I for. 



the agency adopts emergency regulations, do you think it's 
appropriate for them — 

MS. KOZBERG: No, I do not think so. 

SENATOR AYALA: That was the answer I was looking 



6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 



MS. KOZBERG: Okay, sorry. 

CHAIRMAN LOCKYER: I have nothing further to ask 
about . 



Let me inquire if Members do? 

We'll renew a willingness to have anyone in the 
audience testify if they wish. 

I would recommend, since action doesn't have to be 
taken until January — 

MS. KOZBERG: No, it's December 7th. 

CHAIRMAN LOCKYER: I thought you were appointed in 
early January. 

MS. KOZBERG: No, I was appointed December 7th. 

CHAIRMAN LOCKYER: Well, that's fine. We don't have 
to do anything until then. 

I think we can probably keep it under submission for 
the time. There's, perhaps, an opportunity for the Committee to 
vote in the next week. The greater likelihood is to wait until 
December, because we'll be back on, I think, the 5th, and we 
won't have new hearings, or anything of that sort. 
25 Just for myself, what I am trying to sort out is the 

conflict I feel between knowing that this is an exemplary 
appointment, that you're well-suited and energetic, doing what 
seems to be a good job, and a range of concerns about various 



26 
27 
28 



35 

subunits in your Agency that seem to be examples of 
bureaucracies that need to be reined in. I'd like some more 
specific evidence of that happening before moving forward, and 
then some of these philosophical disputes that trouble me, and 
I ' m not quite sure what the appropriate thing to do in those 
circumstances is. That is, do we just say, well, the Governor 
gets whomever they want, even if you disagree philosophically, 
or do we have some role in that domain. I'm not sure. 

So, I'd like some time to mull and think and consult 
with my colleagues, but we'll try to be prompt and fair. 

MS. KOZBERG: Thank you, Senator. 

CHAIRMAN LOCKYER: Thank you for a nice discussion. 

SENATOR BEVERLY: Mr. Chairman, just a comment. 

I would hope we could act before December, if for no 
other reason, who's going to be on the Rules Committee come 
December 7th or December 5th. 

CHAIRMAN LOCKYER: Well, there'll be an election. 

SENATOR BEVERLY: I understand, but this is a member 
of the Governor's personal staff, not another appointment. 

CHAIRMAN LOCKYER: I understand. I'm aware, and 
that's 40 percent of the problem. 

Thank you very much. 

MS. KOZBERG: Thank you. 

CHAIRMAN LOCKYER: I think you'd probably like to 
have a few minutes . Why don ' t we take another five minutes , and 
then Mr. Dunphy will be next. 

[Thereupon a brief recess was taken.] 

CHAIRMAN LOCKYER: One thing we've learned, 



36 

Mr. Secretary, is that you're a patient man. You've had to sit 
through the stuff yesterday and again this morning. I'm sorry. 

It ' s mostly a problem caused by being the end of the 
session. 

MR. DUNPHY: I understand, Senator. I hope my reward 
i comes at the end. 

[Laughter. ] 

CHAIRMAN LOCKYER: There's one there somewhere. 

We have a quorum present, and thank you, sir, for 
your presence. 

Did you have something, it looks like you do, that 
you wanted to — 

MR. DUNPHY: I have a statement, Senator, but in the 
interest of brevity — 

CHAIRMAN LOCKYER: Go ahead, please. 

MR. DUNPHY: I certainly appreciate the opportunity 
to appear before the Committee today. It's obviously an honor 
to serve the State of California in this capacity and a 
privilege to work with the Members of the Legislature for the 
benefit of the State of California. 

Let me also say that I understand only too well the 
seriousness of the tasks that face the Agency as we prepare for 
the future. And as you know, just 14 days after having been 
appointed, on January 4th, the Northridge earthquake sent 
shock waves through the state, Southern California and the 
nation, and I might add, internationally as well. It's a jolt 
that has affected us all, and will continue for some time. 

But even in the face of such an unprecedented 



37 

disaster, we were able to transform, in less than six months, 
from the rubble of our crippled transportation networks, the 
majority of freeways to pre-quake capacity, keeping traffic and 
commerce flowing, which is the life blood of our economy. 

We helped to provide immediate shelter to those in 
need, and as we continue to rebuild our damaged neighborhoods, 
we also recognize the sizable challenge of providing for future 
safety, housing and transportation needs. 

I remain optimistic that we can meet these challenges 
to provide for California's future. I plan to call upon and 
encourage the same can-do attitude and spirit of innovation that 
allowed us to rebuild the Santa Monica Freeway in just 65 days. 

As Governor Wilson said, and it was widely reported, 
"They can shake us, but they can't break us." 

California has the talent pool and the will to 
succeed. I believe that within the Wilson administration and 
the Legislature, there is a will to come up with the solutions, 
to face the issues facing government today, and I look forward 
to working with you to achieve those goals . 

Thank you, sir. 

CHAIRMAN LOCKYER: Thank you. 

Any cards in your pocket, reminders from your 
daughter? 

He has this little cute habit of keeping comments in 
his pocket: the slogan for he day, or the month. It's nice. 

Well, let me just ask, first, if there are questions 
from any Members of the Committee? Senator Ayala. 

SENATOR AYALA: You mentioned the earthquake issues 



i 



38 



9 
10 

11 
12 
13 
14 
15 
16 
17 



21 
22 
23 

24 



and problems that we experienced earlier this year. 

As you know, we tried to get the funding through a 
general bond that failed in June. Does the state have any plans 
to carry out, or did you have any back-up plan if that issue 
failed? Where are we today? Are we in a vacuum that we don't 
6 know where we're going in terms of funding for these programs? 

MR. DUNPHY: Let me answer first by saying that the 
Legislature and the Governor have always believed that the 
maintenance of the freeway system is the number one priority. 
You have to protect that which you have. 

The back-up plan was always that the first revenues 
to be achieved through the gas tax were to be applied to the 
preservation of the system, and that includes the retrofitting 
and the restoration of the freeways, should they need 
restoration. So, that back-up plan was always there. 

What it effectively did, however, without the 
addition of revenue from any source, was to impact the progress 
8 of other construction projects that are contained within the 

19 j state Highway Implementation Plan. 

20 And so, the planning was there, and the effort to 
secure additional revenues through the Proposition 1-A to 
provide about a billion and 50 million dollars for the 
retrofitting of bridges throughout the state. And I add that 
because I think there was a misperception on some of the voters ' 



part that that was only to apply to the Los Angeles area, where, 
26 in fact, it was to provide funding for what we refer to as phase 

two of bridges, about 1355 bridges, throughout the state. 
28 I might add, for Senator Lockyer and Senator Petris, 



39 

that there are more in the Bay Area than there are in the Los 
Angeles area . 

So that the revenues that we expected were denied us 
by a vote of the public, and so we had the plan in place to go 
forward by utilizing existing revenues from existing sources. 

What we have done, and if you'll permit me to expand 
on that, I might answer in advance questions with respect to the 



8 action taken by the California Transportation Commission to 

9 secure approval for the implementation of the Katz-Killea bill, 

10 a bill that was passed in 1991, right after the Loma Prieta 

11 earthquake, which recognized the problem that might exist 

12 between the competition for funds for seismic retrofit and for 

13 the construction of STIP projects. And that bill specifically 

14 J provided that the California Transportation Commission, as an 

ii 

15 issuing agency, should they reach certain findings of needs, 

16 could issue short-term revenue anticipation notes, secured only 

17 by the future gas tax revenues, not General Fund revenues, but 

18 !| gas tax revenues. And that those notes would have — could 

Ii 

19 | extend no farther than the year 2000, and would provide the 

20 repayment source for those notes, and therefore making them 

21 marketable. 

22 That plan is in place at this point and will provide 
for uninterrupted seismic retrofitting, while permitting some 
vary important projects to go forward. 



23 
24 



25 SENATOR AYALA: What is the rationale behind bonds 



26 



issued to take care of the highways and freeways in our state 



ii versus a sales tax? 



28 



Now, the Bay Area problem, has that been completely 



7 

8 

9 

10 

11 

12 



24 



40 



restored now — 

MR. DUNPHY: No. 

SENATOR AYALA: — due to the earthquake? 

MR. DUNPHY: I expected a question on that. 

No, sir. For a variety of reasons, answering your 



6 last question first, the restoration of the Cypress Freeway and 



the completion of the 1-280 are underway, but they have been 
stalled by a variety of local decisions which reflected views on 
where the freeway, particularly the Cypress, should be restored, 
and it necessarily, in the face of a rebuild in place issue, 
caused the local community to ask questions about where it 
should be built. And so, a new route was adopted. And through 

13 fi that process, environmental impact reports, et cetera, meeting 

14 community needs, that greatly stalled the Cypress. 

15 With the 280, the Department actually began 

16 j restoration and retrofitting of that freeway, but were stopped 
n i by the seismic safety review committee, seismic safety peer 

18 group, actually, who said that the method adopted did not meet 

19 their more conservative view. So, we stopped for a year while 

20 j research was conducted at the University of California at San 

21 I Diego, in their major structures laboratory, and determined a 

22 , way in which we could retrofit that two-level viaduct. Very 

23 complicated structure. 

And following the completion of that work, the 

I restoration work began with about five new contracts to complete 

26 it. 

27 SENATOR AYALA: None of the delays were the result of 
lack of funding. The sales tax was sufficient to take care of 



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the problems . 



2 MR. DUNPHY: Yes, and in the Bay Area, you'll recall 

3 that the federal government obliged itself to pay for the 

4 restoration of those freeways. So, that was — there was not a 

5 funding issue at no time. They're almost all local issues 

6 concerned with where you build it, how you build it, et cetera. 

7 SENATOR AYALA: I guess what I'm trying to point out 

8 is the fact that we have the sales tax for, what, two and a half 

9 years, whatever it was, and then — 
MR. DUNPHY: We had a quarter cent sales tax for a 

period of time, and I don't recall what that period was. 

SENATOR AYALA: And we had sufficient funding, with 
13 the help of the feds, to take care of the issues. 

I just wonder why we're going into the bonding 
15 problem here, where we extended, and it takes 40 years to 
•6 amortize it? The cost of the bond will be twice that amount of 
what we really are borrowing from future generations. People 
that will come 30 years from now don't even know where the 
earthquake area is, but they'll be paying for it, as opposed to 
a sales tax that would terminate in two or three years, and it's 
gone. 

So, heaven forbid that we have another type of 
problem earthquake-wise, seismic, and we'll have two bonds now 
trying to come up with the funding for that. And again, folks 
that come in 30, 40 years from now will help amortize the bonds 
and they don ' t even know where Northridge is today . 

I don ' t understand the Governor ' s philosophy on this 
issue. 



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MR. DUNPHY: Senator, I think that there is always 
room for discussion as to the efficacy of sales taxes and bonds. 

But you've permitted me to pull one of my cards from 
my pocket, and to remind you of the differences that pertain to 
Loma Prieta, 1989, and Northridge, 1994. 

At Loma Prieta, in '91, the sales tax was 6 percent; 
today it's 7.25 percent. The gas tax, both federal and state 
combined was 18 cents; today it's 36.4 cents. The interest on 



9 G.O. bonds then was 6.84, compared to 5.23, a much lower 



interest rate on bonds today. And the unemployment rate in the 
State of California was 5.1 at Loma Prieta; it was 9.4 at 

12 Northridge. 

13 The Governor and I will clearly support that belief 
that the economy of the state continues in a fragile state, with 
recovery being very slow, and that a sales tax applied is an 
instantaneous withdrawal from the economy of a certain amount of 
money, which does not happen when bonds are sold or short-term 



18 notes. 



The people who give up the money are the investors in 
the notes or the bonds, and they don't draw it from the economy. 
And so, I believe that those thoughts certainly are among those 
that the Governor has in his mind, and I certainly recognize 
that the economy cannot stand too many hits. And so, I would 
suggest that that ' s the driving — 

SENATOR AYALA: Given all the things you just spelled 
out here, bond issues are paid from the General Fund. And where 
does the General Fund get the money but from the taxpayers? 

MR. DUNPHY: They have been, sir, except this year, I 



i 



43 

believe, the State Highway Account is providing funding for the 
bonds . 

I know that typically G.O. bonds are paid for from 
the general revenues . They ' re paid in the future as opposed to 
current, and I think that's what we're talking about. 

SENATOR AYALA: Again, the General Fund is provided 
by taxes all over the state, is it not, the General Fund. 

MR. DUNPHY: Just like the sales tax. 

SENATOR AYALA: So who are we kidding when we talk 
about a sales tax, and I know tax is a dirty word to a lot of 
people. I pay them, too, so I don't like them. But I'd rather 
pay for two years and not string it out over 40 year. When you 
get through paying for the bond, it'll be three times, two and a 
half to three times, what the bond's value was, the amount of 
the bond. You'll be taxing people that come in other 
generations . 

It doesn't make sense to me, when we talk about a 
sales tax, and we all say, tax, you know, it's election time, so 
we don't talk about a tax. However, we do pay, to be redundant, 
we pay the bonds from the General Fund, which is tax. So, I 
don't understand what the difference is. 

Thank you. 

MR. DUNPHY: You're welcome, sir. 

CHAIRMAN LOCKYER: I think Senator Petris wanted to 
perhaps follow up on some of those kinds of issues, but perhaps 
I could, since he had to step out briefly, call on Senator Kopp, 
whom I think is in the same policy universe with respect to some 
concerns or questions he might have. 



44 

SENATOR KOPP: Thank you, Mr. Chairman and Members of 
the Rules Committee. 

I don't want to prolong the discussion which Senator 
Ayala instituted with respect to the funding deficiency in the 
State Highway Account, and the funding deficiency for seismic 
safety retrofitting. My views are well known, and obviously, 
they ' re at variance with Mr . Dunphy ' s and with the Governor . 

I'd just add, perhaps, a footnote to that line of 
inquiry by Senator Ayala. And that is the abandonment of the 
time-honored policy of using gasoline tax money for not only the 
projects themselves, but also for retrofitting and for 
reconstruction. And that has certainly other elements than a 
sales tax. Plainly and simply, the gasoline tax is the 
quintessential user's fee: those who use it should pay. 

And I'll add one more footnote, and that is, I hear 
discussions about a vehicle mile tax. And that's my first 
question to Mr. Dunphy. 

Is there advocacy of substituting a vehicle mile tax 
within the Agency? 

MR. DUNPHY: Senator, there's no discussion that's 
come to my mind. 

I believe that there are discussions, and I think 
appropriate discussions, relating to the structural funding 
problems associated with transportation, particularly the 
highway system. 

Yesterday, during Ms. Schafer's hearing before this 
body, a number of people discussed the zero emission vehicles, 
which are being mandated by the state. The alternative fuels, 



45 

ethanol particularly, which is taxed differently from gasoline 
taxes. And intrinsically, the increased efficiency of 
automobiles to get more miles per gallon, and therefore you 
collect fewer taxes per gallon. 

So, there is an increasing attention being paid to 
the manner in which highway, particularly, let's call it 
transportation improvements and maintenance, is paid for. 

And in that context, I would also call your attention 
to a statement that I made at the time that I appeared before 
the California Transportation Commission, wherein the Governor 
has asked that I gather together a group of business people and 
transportation people around the state to examine current 
issues, of which transportation funding should be a component. 
And that it needs necessarily to address a vehicle mile tax, if 
you will. I think also we cannot avoid talking about congestion 
pricing and/or pollution pricing, and those ways in which we 
fund and construct our freeways . 

SENATOR KOPP: Well, I want to divorce congestion 
pricing and pollution pricing from vehicle miles. 

So that my colleagues are informed on it, that's 
based on the concept that the more miles you drive, the more tax 
you'll pay, rather than the gasoline tax, which is based upon 
the amount of gasoline you consume, which in itself is a 
motivator to drive an automobile that obtains more mileage per 
gallon of gas, and that in turn has benign consequences as far 
as pollution is concerned. 

But what also caused me to ask the question about the 
discussion is that some of the people who have been mentioned 



46 



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11 
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1 for this task force that you ' re convening are people who are 
advocating a vehicle mileage tax. I want to state that I am 

3 opposed to that, strongly opposed to that tax. So, that 

4 concerns me that some recommendation to that effect may arise 

5 from the conference. 

6 The second matter that I want to inquire into is what 
has happened with respect to seismic safety retrofit of toll 

8 bridges. We have nine toll bridges in the state system, 

starting with the Coronado Bridge, and then the Vincent Talmadge 
Bridge, and then the Dunbarton Bridge, the San Mateo-Hayward, 
the Bay Bridge, Richmond-San Rafael, and the Benecia-Martinez 
Bridge in Antioch, and Carquinez. 



7 



13 One of the important issues, one that I discussed 

with you in Senator Lockyer's office last month, was the budget 

15 agreement that provided that for the fiscal year '94-95, $136 

16 million would be appropriated from the State Highway Account for 

17 the seismic safety retrofitting needed on all, as I remember, 

18 except two of those bridges. There were two, as I remember, on 

19 the Bay that weren't part of that list. 

20 And I was surprised, and that was the reason for the 

21 meeting in Senator Lockyer's office, to find that only $40 
million was appropriated from the State Highway Account for 

23 1994-95, and that the balance of about $90 million would be 
fought all over again the next fiscal year and probably the 
fiscal year after that as to whether that money should be 
appropriated from the State Highway Account or from the toll 
bridge revenue sub-account. 



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The agreement was to settle the $136 million for 



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'94-95, because no state agency can enter into a contract 
without having budget authorization for the full amount of the 
contract. And a $136 million contract signed during this 
fiscal year must have budget authorization for the full amount, 



5 even if, as you stated in that meeting and as has been 



reiterated in a letter from the Director of Caltrans, even if 
only $40 million can be spent in this fiscal year. 

And the budget control language, for the benefit of 
the Members , the budget control language in this year ' s budget 
stated that Caltrans couldn't use toll revenues for seismic 

11 retrofit until all Regional Measure 1 projects were completed. 

12 Regional Measure 1 was approved by the voters in seven of the 

13 j nine Bay Area counties in November, 1988, that raised the toll 
to a buck on those bridges; on six of the seven it was less than 
a buck. And it raised the toll, based upon the promise to the 
voters, of specific projects, like a new span on the Carquinez 
going westward. That one was opened in 1927; should be replaced 
and other new projects. 

19 Now, the Governor vetoed that language, but with the 

20 assurance — and it's too bad Senator Lockyer isn't here — but 

21 the assurance was to him that the $136 million would be 
appropriated from the State Highway Account for that seismic 
retrofitting. 

Now that ' s been reversed . That is a very serious 
25 j subject with me, Mr. Dunphy. 

I guess I can ask you how you justify or how it ' s 
justified, but it probably won't alleviate my concern or my 
agitation about it. To put it in plain words, it's almost as if 



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48 

you have to get a signed contract, because the year before, I 
went through that as far as the budget was concerned. This 
year, Senator Lockyer did, and it's like you have to have a 
signed contract that's somehow enforceable in the courts. 
That's $90 million that's been taken away. 

And I know that next year, you'll want to take it out 
of the toll bridge revenue sub-account; right? 

MR. DUNPHY: Well, Senator, there are probably 
a number of discussions that could ensue. I'm not exactly — 
where to begin. 

But first, let me emphasize that I consider it one of 
my fundamental responsibilities to assure that all of the Bay 
bridges, all of the toll bridges, are seismically retrofitted. 

I do not personally come down on the side of where 
that revenue should come from. Each of the last two years, the 
Legislature and the Governor's Office have had a debate and 
discussion on what was deemed appropriate. And I think there 
clearly is a difference of opinion. 

I believe that there is a — there are a body of 
folks who would believe that it is appropriate that revenues 
from the toll bridges be used to seismically retrofit those 
bridges . Much in the same sense as you have referred to 
gasoline tax as being a user tax, those who use the bridges are 
also users of a facility that could be paid for from their use 
of those bridges by tolls. 

SENATOR KOPP: So, they shouldn't have to pay gas tax 
for the gas used going across those bridges? 

MR. DUNPHY: I'm not suggesting that, but that the 



26 I 



49 

folks in Alturas, or Chico, or Imperial Valley, who never use 
the bridges, would indeed have their highway improvement money 
diverted to the improvement of the bridges. Should the State 
Highway Account — 

SENATOR KOPP: Are those bridges part of the state 
highway system? 

MR. DUNPHY: Yes, sir. 

SENATOR KOPP: So then, logically, I shouldn't have 
to pay tax on the gasoline I use going across the bridge, 
because otherwise, I'm paying twice. I'm paying the tax on the 
gasoline I use up, and then I'm paying the toll in addition to 
that. 

MR. DUNPHY: Well, that's what good arguments are 
made over. 

SENATOR KOPP: Isn't that fact irrefutable? Aren't I 
paying tax on the gasoline I use up? 

MR. DUNPHY: Yes, you are. 

Let me also remind you of another quirk in the law, 
if you will, that the federal government provides no funding for 
the restoration of bridges that receive tolls that are used for 
other than simple bridge maintenance. Therefore, if you were to 
take the $650 million — 

SENATOR KOPP: Let me stop there. There's a quirk to 
that quirk, too. The federal government paid $60 million for 
resurfacing the deck of the Golden Gate Bridge. And it did it 
on the rationale that the Golden Gate Bridge District operated 
bus transit service. 

Bay Bridge tolls are used in large part to defray the 



50 

costs of operating the AC transit service, and BART and the 
Muni. So, there is a parody of use of money. 

MR. DUNPHY: That is — I would not question that you 
are correct in that. However, I think I'm equally correct that 
the federal government will not provide any matching money for 
i the restoration of the bridges. And that if — if the $650 
million comes totally out of the State Highway Account, with no 
matching federal money, that draws down significantly on the 
available State Highway Account funds that can be spent. 

So, it is a siphon that draws a great deal of money 
into the state bridges. 

Senator, I think you and I both know the need exists 
currently to retrofit those bridges . And I have directed the 
Director this year to do everything that he can toward the 
restoration of the bridges through basically preliminary 
engineering, and some soils investigation, et cetera, and will 
spend it all out of the State Highway Account, as the budget — 

SENATOR KOPP: That's 40 million, and then next year, 
we'll be fighting about allocating next year $52,810,000. We'll 
fight about that. And then in '96-97, $43,190,000. 

Last year, '93-94 budget, I obtained a commitment 
ji from Kevin Sloat that the Governor wouldn't veto the budget 
language on toll bridge. You'll remember last year, again, 
there was $40 million, and because the toll bridge sub-account 
is a continuous appropriation, Caltrans can just spend it, 
appropriate it itself or spend it, it's continuously 
appropriated to Caltrans, they were going to take $40 million. 
They wound up taking $8 million, and that was part of the budget 



28 



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51 



control language. Kevin Sloat assured me the Governor wouldn't 
veto it. The Governor did not veto it. 

This year, the assurance was $136 million would be 
obligated from the State Highway Account, and that budget 
control language was vetoed with the promise, "Don't worry. We 

6 will take the 136 million and obligate it to the State Highway 

7 Account," and it hasn't been done. 

8 So, we've lost it. We've lost $90 million. 

9 The third issue that I wanted to comment on was, I 

10 have a bill, as you know, which would sever Transportation as a 

11 separate agency from Business, Transportation and Housing. 



Is it your position, independently of the Governor's, 
that that bill should not be enacted? 

MR. DUNPHY: I would personally oppose it, and I'd be 
happy to tell you why. 

SENATOR KOPP: Well, I don't want to take up time of 
the Committee here, but I invite the attention of the Committee 
to the fact that that bill is in Assembly Ways and Means, as I 

19 recall. I intend to pursue it and present it. I can secure 

20 passage in the Assembly to the Governor for signature. 

21 Circumstances change. But anyway, that's part of the picture 

22 that ' s out there . 



That ' s more informational for the Committee . 
Thank you, Mr. Chairman. 



25 SENATOR CRAVEN: You're welcome. 



26 






Senator Petris, do you have any comments? 



27 I! SENATOR PETRIS: Yes. 



28 



You commented on the Cypress thing, but I didn't get 



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the whole thing. I had to leave. I'm sorry. 

That's in my district, as you know. I get inquiries 
all the time as to how we're doing. You mentioned the delay 
caused by the local objections to the proposed route, and so 
forth, and now they're finally settled on it over the railroads, 
and so forth. 

MR. DUNPHY: Yes, aright. 

SENATOR PETRIS: What's the status of that now? Is 
that moving ahead? 

MR. DUNPHY: Yes, it is, Senator. The construction 
work is divided, I believe, into seven contracts that are 
sequenced; first being the longest they have to be completed, 
and those are those that go through the railroad areas . That 
work is under construction. 

I visited it last week. Foundations and columns are 
being poured, and the railroads are getting out of the way and 
realigning their lines, et cetera. 



18 Those are contracts in Title C and D. The next 



contracts will be other letters, if you will, of the alphabet, 
up through F, and we'll go forward incrementally with a 
conclusion that they will be constructed about a year faster 



ii 

II than earlier program because we've taken some of the contracting 



23 

24 
25 
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techniques that we used at Northridge and are incentivizing 
[sic] one of the contracts that was the longest in term and at a 
cost of about $3 million. 

We've been able to secure about a one-year 
acceleration on the total completion of the project. 

SENATOR PETRIS: Does that system involve a different 



53 

kind of preplanning and cooperation with the contractor and 
Caltrans, and so forth? 

MR. DUNPHY: It — 

SENATOR PETRIS: That was done at the Caltrans 
building in Oakland, as I recall, and they accelerated that 
substantially through this other method. I wondered if that's 
the same idea. 

MR. DUNPHY: I can't tell you because I'm not 
familiar with the Oakland building, but the incentivation takes 
place by asking the contractors to bid both the dollar amount 
and the number of days amount. And they add those two together, 
and the low bidder is awarded the contract. 

And we have determined that by both changing the 
sequence of performing the work, and incentivation, that we can 
accelerate by about 12 months. 

SENATOR PETRIS: That's a lot. 

MR. DUNPHY: Yeah, it is. When you look at what we 
did in Northridge, it's extraordinary, quite frankly. 

We've been able to do, and I'll simply add, we've 
been able to do a similar thing, not quite the same, at the 280 
in San Francisco. We will open up, I think — well, we have 
opened up five lanes of traffic where we had two on the 280, 
with — while traffic is underway, we're continuing the 
retrofitting, which is a chancy but safe thing, but it shows 
aggressiveness in trying to get the traffic moving again. 

SENATOR PETRIS: You mentioned the importance of 
maintenance. 

MR. DUNPHY: Yes. 



54 

SENATOR PETRIS: We get complaints in our office 
about maintenance up and down 880. 

MR. DUNPHY: Yes. 

SENATOR PETRIS: Is there some project going on now 
to bring it up to snuff? 

MR. DUNPHY: I can't tell you the specific on 880, 
except to repeat again the importance of maintenance in 
maintaining in good operating condition the — all of the 
highways . 

And one of the issues that the state faces is that 
the traditional life span, life cycle, of a state high is 
designed at 20 years. We actually secure about a 30-year design 
life out of our freeway designs. 

But if you look at 80, and 5, and 101, they're over 
40 years old. So, the need for maintenance will be a growing 
budget account. 

SENATOR PETRIS: Is that a function of the materials 
that are used for the highway itself, for the road? 

MR. DUNPHY: It's a combination. It's not so much a 
function of the materials that were used as opposed to the use 
of the highway, the numbers of trucks and vehicles using the 
roads . 

The number — the number of vehicle miles traveled in 
the State of California has significantly exceeded the 
anticipation of 20 or 40 years ago. 

SENATOR PETRIS: That seems to be the case all the 
time. We always seem to fall short, even though we try to allow 
for it. It's very hard to predict, I know, but that's been a 



55 



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pattern we ' ve been in for many decades . 

Some people, when I try to explain this, point to the 
Appian Way that's still in use, built by the Romans. I wonder 
if we should go over there and figure out what they're using, 
even though horses ' hooves are different from gigantic trucks . 

Do you have any research being done on that? 

MR. DUNPHY: I do not, no, sir. I suppose they built 
those for elephants. 

SENATOR PETRIS: No, that was Hannibal. 

MR. DUNPHY: I can't help you. 

SENATOR PETRIS: On the goals you mentioned before, 
on the hiring goals, are you in sinq with the goals; are you 
above them or below them in personnel? 

MR. DUNPHY: The hiring goals pose an intrinsic 
problem. The goals are not too difficult to achieve. 

I would call your attention to the fact that in the 
Northridge earthquake, the Director of Caltrans set a goal of 40 
percent minority, women, all the MBE-WBEs. And he achieved it 
in almost all of the contracts; sometimes a couple percent 
below, sometimes a couple percent above. 

You've met a goal. You've met a statistical goal. 
The problem is what makes up that minority composition, and the 
problem that the African-American community does not enjoy a 
sufficiently high percentage to satisfy their particular needs. 
The women-owned and the Latino-owned enterprises do 
significantly better, so that there — particularly in Oakland 
at the Cypress, the local community is very anxious to have 
local people — 



10 



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SENATOR PETRIS: Yes, I was going to come to that 
also. That came up in meetings, many meetings that were held 
with Caltrans, about hiring local people. 

MR. DUNPHY: We've done — we've done such things as 

. i 

5 !| permitting a new technique of a mentor-disciple, if you will, as 

6 ji a subcontractor to a general contractor. That works like this. 

1 

7 A major — let's say, a majority contractor with 

8 skills and experience, will couple with a minority contractor 

9 who either doesn't have bonding capacity or particular 
experience. And they will permit that to qualify as a 



u subcontractor, meeting goals. 

And the mentor effectively helps educate, teach, 

13 train, et cetera, the minority contracting company to learn that 
i 

14 S particular business and to benefit from the experience. 

15 Because I see one of the biggest problems with 

16 particularly the African-American community, they haven't had 

1 7 the training and/or the opportunity and/or the bonding capacity 
to elevate, to help themselves achieve the goals that they want. 
And this particular mentor-disciple program will provide the 
kind of training that should help. 

SENATOR PETRIS: How long has that been in effect? 

MR. DUNPHY: It's been introduced on the Cypress. It 
is something that will be going on in your district, and we're 
working very hard to make that work. 



25 SENATOR PETRIS: Is it true that the Altamont Pass 

26 will be subject to a toll booth, or something? 

MR. DUNPHY: Well, I read that in the paper. I have 
learned I shouldn't believe everything I read in the paper. 



28 



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57 
SENATOR PETRIS: It wasn't a press release of yours, 



obviously. 

MR. DUNPHY: No, it wasn't. 

SENATOR PETRIS: Or Van Loben Sels. There was a 

blurb on it in the paper. 

6 CHAIRMAN LOCKYER: I missed that one. 

1 |j SENATOR PETRIS: Well, you may want to inquire. 

CHAIRMAN LOCKYER: I certainly will. 

SENATOR PETRIS: I'd like to go over to another 

department of yours — you have a lot of responsibilities — and 

that's Housing. 

MR. DUNPHY: Yes, sir. 

SENATOR PETRIS: Particularly farmworker housing. 
j 

14 There's been a lot of criticism about the program. I'm sure 

15 it's been brought to your attention. 
|j 

16 At one time, I carried a lot of legislation relating 

I 

17 j! to expanding our housing for farmworkers, and the problems were 

i 

18 that there was very little housing provided, and it was very 

19 shabby. I remember in San Diego County, I had pictures of holes 

20 in the ground were some farmworkers were living, actually living 

l 

21 in holes in the ground. So, if they elevated to a lean-to under 

22 some corrugated iron, that was luxury compared to the holes in 
i the ground . 

I haven't heard those kind of complaints lately. I'm 
going back a few years. But I still get a lot of criticism 
about laxity in enforcement of standards in housing that is 



27 provided, especially important in monitoring whatever the 



28 



private sector provides, as well as keeping an eye on the state. 



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Are you up to date on housing arrangements that we're 
trying to make for farmworkers? 

MR. DUNPHY: I am conscious of the responsibility of 
Housing and Community Development to monitor and assure that 
there is safe and adequate housing for migratory farmworkers. 

SENATOR PETRIS: We have about 900,000, I understand, 
in that category in California; 900,000 migratory farmworkers, a 
large percentage of whom need housing. 

MR. DUNPHY: Yes. 

I am reminded of a Legislative Analyst remark that 
suggested that the Department was, perhaps, lax in its 
enforcement, and at the same time suggested that since it's a 
General Fund agency, that the resources available to it almost 

14 work in contradiction to the need to do the work. So, there's a 

15 J paradox involved there. 

I think that the budget conditions for the last 

several years have mitigated against as much enforcement as 
perhaps is necessary. 

SENATOR PETRIS: Well, if you've seen the Legislative 
Analyst's comments, I think you'll agree that there's a real 
need for more inspectors. We don't have them. 



I 



22 MR . DUNPHY : We do ; we need more budget . And it ' s 



one of those problems that each of you as Senators, and Senator 
Lockyer particularly, are faced with the either-ors, and the 



alternatives that are sprinkled throughout the budget. It's 



very difficult. 

CHAIRMAN LOCKYER: Well, it may be there ought to be 
greater effort to get those who benefit from available 



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59 

workforces that are healthier because of housing being available 
to pay a fair share of those burdens . I don ' t think there ' s 
been any real effort to enact fees that are sufficient to cover 
the enforcement activities. 

SENATOR PETRIS: As a matter of fact, the Department 
has suggested raising the rents . They can hardly afford to pay 
what they're paying now. The revenue ought to come from some 



8 other sources. The state is providing camp sites, and different 



kinds of housing. We've got to find a way to increase that 
revenue . 

Are you working on that in reaction to the reports 
you've been receiving? 

MR. DUNPHY: I have no current program, Senator. Not 
that I'm ignoring it; it's an issue that I have not been 
currently working on. 

The Department is aware of the problem and the 



17 criticism. 

18 

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21 I time 

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SENATOR PETRIS: Who's the head of that? 

MR. DUNPHY: Tim Coyle. 

SENATOR PETRIS: Yes, I've met with him from time to 



MR. DUNPHY: Yes. 

The actions that we can take are to try to generate 
within HCD efficiencies that can cause their internal operating 
and administrative budget to go down, and that is taking place. 
There's been a significant reduction in forces because, in part, 
the housing bond that was to be a part of Proposition 1-A 



ii 

28 ! failed, and we're reducing significant staff. 



60 

If we can convert some of that staff to enforcement, 
we can get some help out of it. But otherwise, it comes out of 
a Budget Act allocation. 

SENATOR PETRIS: General Fund. 

MR. DUNPHY: Yeah, it is something that needs to be 
done. I have — it is — has come to my attention. I am aware 
of the need to do it. 

SENATOR PETRIS: Does the Governor have a program to 
improve that situation? Have you recommended something to the 
Governor? 

MR. DUNPHY: Not at this point, sir. 

SENATOR PETRIS: Are you planning to? 

MR. DUNPHY: I think I should give it the attention 
that it deserves . 

SENATOR PETRIS: I hope so. It's really a blight on 
California. 

These conditions have existed more or less bad for a 
long, long time. I think it's time we faced up to it, and even 
if we don't have the money, we ought to have a goal and get as 
close to it as we can. 

I remember carrying legislation when Deukmejian was 
Governor for a revolving fund, at low interest, 3 percent, to 
make it available to the private sector. The Farm Bureau 
supported it. Other individual growers supported it. They 
said, "If you lend us the money at that rate, we'll be happy to 
build better accommodations ourselves . " And the Governor vetoed 
it because he didn't think the state should be in the housing 
28 business. 



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I reminded him we were already in the housing 
business. We had these migrant camps funded by the state. I 
said, "I'm trying to get you out of the housing business, you 
know. Let the growers who are willing to do it, do it." 

Maybe that should be revived. Would you favor some 
kind of a revolving fund that, if we had the money, to provide 
the resources to growers who are willing to tackle the problem? 

MR. DUNPHY: I would certainly want that to be one of 
9 the options . 

SENATOR PETRIS: Well, I hope you keep working on it. 
Even without the money, we ought to have a goal so that when the 
money comes in, we can start catching up. It's really 
disgraceful, almost a million workers subjected to this 
perennial lack of decent, adequate housing. 

How many more inspectors do you think you would need 
to have an adequate program? 

MR. DUNPHY: I can't tell you that. 

SENATOR PETRIS: You're not on top-down on a day-to- 
day basis; you're above that agency. I'd have to ask Mr. Coyle 
about that, I guess, to get more detail. 

MR. DUNPHY: I think we could probably equate the 



jl dollars needed with some budget allocations. They cost so many 



dollars per PY. 

SENATOR PETRIS: That's true. 
25 CHAIRMAN LOCKYER: While we're in the housing 

universe, another area of some controversy has been trying to 



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> motivate local agencies to fulfill their obligations to include 
updated housing elements in their general plans. It's been, I 



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guess, postponed for a couple of years because of budget 
constraints . 

Have you had an opportunity yet to involve yourselves 
in some of the local housing controversies? I guess they 



include the local elements, whether they should be postponed 



again, or keep the nudge going. Additionally, at the state 
level, the various department or agencies that all have a role, 
and there's been thoughts about consolidating some of those. 
I don't mean the ones that, perhaps, Senator Kopp 
talked about earlier, of trimming down your Agency to be a 
transportation focus, but rather whether the unit in the 
Governor's Office and HCD, and so on, if there should be some 



] 3 jj integration. 



Have there been discussions of those things? 

MR. DUNPHY: Senator, we have under way a strategic 
management and consolidation study that's going on in the 
Agency, because the Agency is undergoing some change. 

I would expect that as a policy item, the role in 
adopting and approving housing elements in general plans would 

20 i| either be reinforced or modified. 

21 I can't tell you where that direction will go, but 
they still — they currently still have the obligation to 



23 approve housing elements. 



CHAIRMAN LOCKYER: There seems to be a lack of vigor 



25 from the Housing Department in enforcing local housing element 

26 |j requirements, but I have the feeling you haven't yet involved 
I 

27 yourself — 

28 MR. DUNPHY: It hasn't come to my attention. 



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Nobody ' s been pounding on my door . 

CHAIRMAN LOCKYER: What's the strategic plan? You 
mentioned that there's some changes in the Agency? 

MR. DUNPHY: The Department, HCD. 

CHAIRMAN LOCKYER: Okay. 

MR. DUNPHY: HCD has a need to re-examine its 
function and its mission, and size itself appropriately. 

8 CHAIRMAN LOCKYER: And that's ongoing. 

9 MR. DUNPHY: Yes, sir. 
CHAIRMAN LOCKYER: When would that maybe be 

1 * completed? 

12 MR. DUNPHY: I don't have the answer to that. 

13 CHAIRMAN LOCKYER: They're in the process of doing 

14 that? 

15 MR. DUNPHY: Yes, sir. 

16 CHAIRMAN LOCKYER: I missed, unfortunately I was with 

li 

17 the boss, so I missed Senator Kopp's inquiries, but they're 

18 fairly predictable. 

19 I just wanted to at least mention, and we've had an 
opportunity to talk about this before, a terrible unfairness 
that I think is being forced on Bay Area motorists and residents 
by this and the previous administration. The unfairness in my 
mind is, how do we finance necessary improvements of a major 
sort, major improvements, to the bridges in the Bay Area? 

Recent administrations have followed sort of the path 
of least resistance, I guess. That is, find some money 
somewhere; don't try to raise the gas tax, or something that 
would be controversial. Just go find some money. And the money 



64 

that sits there is toll revenues, which are continuously 
appropriated to the Department. They aren't subject to the 
annual Budget Act. 

That will change, by the way, next year. There will 
not be a budget that gets to the Governor unless that changes 
next year. I've learned now how important it is to just get it 
out there, make it real clear. Because what happens is, and 
your Department's done it again, they commit. They encumber 
tens of millions of dollars of toll revenues for major 
rehabilitation projects, clearly in violation of the statute. 

The statute — I happen to know because I wrote it, 
and I, frankly, cooperated with Caltrans, to my regret; I won't 
again, because I took them for their word that when they wrote a 
distinction minor repair and rehabilitation, that they would 
observe we know what the difference is. Repaving is minor 
repair. Rebuilding the girders and cement around it, and so on 
and so forth, is rehab. That's not a minor repair. 

But they keep — driven, I think, by the budget 
circumstances, and I understand how desperate that makes 
everybody — keep skirting that, and trying to commit bridge 
tolls to projects that should be borne by the Highway Account. 

Now, the tax effects, separate from the transit 
effect, is those motorists are double-taxed. They pay their gas 
taxes like everybody else does, so if you're in San Diego, or 
San Bernardino, or whatever, the motorist pays gas taxes, and 
that's used to improve 1-5, or what have you. But if you cross 
this bridge, you pay your gas tax and you pay your toll, and 
Caltrans expects to use the toll money for repairs of a major 



65 

sort, rather than the Highway Account. And it's unfair, and 
it's a form of double taxation. 

MR. DUNPHY: Senator, one of the problems is, on 
every state highway in the state where State Highway Account 
funds are utilized, they have a federal match. So, you get a 
lot for your money. 

On the bridges, on the toll bridges, the federal 
government gives you nothing . So that there ' s a 
disproportionate amount of money from the State Highway Account 
that has to be drawn to those bridges. 

CHAIRMAN LOCKYER: I understand. 

MR. DUNPHY: That's a problem. 

CHAIRMAN LOCKYER: But that's true of a highway 
somewhere that isn't in the federal system. There are major 
state highways all over the state. They don't get a federal 
match, or if they do, it's a modest one. So, you have the same 
dilemma, but you continue to try at least to program work on 
some state corridors that are not federal. We always emphasize 
federal, because the match is desirable, obviously. 

Well, I mention that. It's very frustrating. It's 
not your fault, other than, again, it's your policy and 
emanates, I guess, from the Department of Finance and the 
Governor's perspectives on funding. 

Let me mention, while I'm in the same area, another 
related issue: tolls on roads. We had this demonstration 
project that was authorized during the Deukmejian era. The 
bill, unfortunately, was not written with sufficient clarity and 
specificity, so part of the problem is our bad work. But 



66 



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basically it said, I think, five projects are authorized, 
several of them, and Caltrans will write the specific contracts 
for implementing those private toll facilities. 

The contract that they executed, I think generally 
the one I know in greater specificity is the proposal that would 
have run through Contra Costa, Solano and Alameda Counties. It 
may be the worst piece of legal work I've ever seen. They ought 
to be hauled off somewhere for malpractice. 

And there are stories that are told. I'll tell you 
one. 

Assemblyman Katz is at lunch with a group of lawyers 
that are his friends that had nothing to do with this particular 
contract. But the same firm, a different group of lawyers, was 
having lunch in the same restaurant. They all managed to 
intersect and interact, and at the time, these contracts were 
controversial because they do everything. They confer air 
rights; they don't make them pay their fair share; they have 
land use impacts that were never examined; contracting out. It 
goes on and on. 

Group Two that represented the Toll Authority, the 
business consortium that was in the room, is laughing about how 
they took Caltrans; that the bozos did a bad job of negotiating 
these contracts. And they're very proud of it, and informing 
the other group that's with Mr. Katz, from a big law firm in 
Southern California. 

Well, that's just the anecdote that runs, and I think 
a correct one. They did a bad job. They probably won't get 
this big project in the Bay Area to ever economically make 



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sense, so perhaps it's not a thing to spend time on now, 
although they keep trying. 

The contracts, you know, in San Diego and in Orange 
County were kind of no-brainers . Just add another lane in the 
median. Even someone in Caltrans could have figured that one 
out. That's now a toll road in Orange County. 

I don't know. You may not need to respond, and I'm 
sorry to sort of rattle on here. 

MR. DUNPHY: That's okay. Actually, Senator, I enjoy 
the opportunity, because I think it's at these opportunities 
that you get to exchange a little philosophy and ideas. 

And I think the idea of a toll road is one that 
provides a utility that the state cannot currently provide. So 
therefore, you're left with the argument of, perhaps, the social 
equity of creating a facility that is paid for by its users, and 
perhaps denied to others because of a lack of income. 

CHAIRMAN LOCKYER: I agree, and that's the 
fundamental issue in my mind. 

19 MR. DUNPHY: Looking at the state today and its State 

20 Highway Account revenues, and revenues from all sources to build 

21 facilities, we're desperately short. And so, when you can get 
the private sector to build such a toll road, and it provides a 
utility that is, perhaps, only cost-constrained, it is a 
utility. It does revert to the state in its ownership. 

So, there is a quid pro quo. It certainly has a 
long-term benefit, and perhaps it has a short-term question. 



27 So, you will always have philosophical arguments 



28 



about that, and I think this is a great opportunity for me to 



6 



68 

express that. 

CHAIRMAN LOCKYER: I worry about its reversion is 

3 about the time it would wear out, which again raises kind of an 

4 economic question. 

5 MR. DUNPHY: Yes, but if it is maintained through its 
35-year life, then it should revert — 

7 CHAIRMAN LOCKYER: Be okay, like the Appian Way? 

i 

8 MR. DUNPHY: I'm going to have to go visit that. 

9 CHAIRMAN LOCKYER: You were almost 25 years in the 
10 construction business. 

MR. DUNPHY: Thirty-two. 

12 CHAIRMAN LOCKYER: Was there an emphasis? What kind 

1 3 of construction did you do? 

14 MR. DUNPHY: Commercial, industrial, institutional. 
j I built libraries, hospitals. I was a contractor, not a 

developer. That is, I built for others under contract. It was 
a wide variety of those kinds of things. 

CHAIRMAN LOCKYER: What would have been the biggest 
single job? 

MR. DUNPHY: Well, it depends on — I should say I'm 
proud. I built a number of very large buildings for one of our 
vanishing industries: General Dynamics. I built probably two 
or three million square foot of engineering office buildings, 
manufacturing facilities, in Rancho Cucamonga. I built all of 



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25 those buildings in Pomona, San Diego. 



26 



They were a great client, a great industry, and I 



27 jj hate to see 50,000 people go someplace else. 



28 



CHAIRMAN LOCKYER: Me, too. 



69 

MR. DUNPHY: But at any rate, that was the kind of 
experience that I did. 

CHAIRMAN LOCKYER: You've been in your job since 
early January? 

MR. DUNPHY: January, yes, sir. 

CHAIRMAN LOCKYER: What's been the hardest issue, or 
the hardest decision so far? 

MR. DUNPHY: I can't say that there have been hard 



9 ,; decisions . 



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11 
12 
13 



I think the thing that I have to get accustomed to 
first is my interaction with government, the Legislature, budget 
issues, which I — the budgets are Byzantine compared to what I 
went through in running a construction company, and seeking 

14 | performance, and so forth. 

i 

15 There is a learning curve in that regard. However, I 

16 feel fortunate that my experiences have included construction, 

17 which gives me some familiarity with what goes on at Caltrans. 

ii 

18 I I was on the board of a bank for a number of years, so the 

19 banking and S&L side is okay. I was always brought into 

20 contract with real estate and real estate appraisal, and so 

21 forth. 

22 My gross experiences have caused me to feel somewhat 
I 

23 .comfortable in the position. And fortunately, I've decided the 

24 I job has to be done from Sacramento, so I've leased a home here. 

j 

My wife and I have reached a stage in life where she likes to do 

26 quilting, and I like to work. So, I stay here and work, and she 

27 | quilts to her heart's content in San Diego. 

28 We have wonderful quality weekends. I go home Friday 



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night, come back Monday morning. 

CHAIRMAN LOCKYER: We're all familiar with that life 
style. 

MR. DUNPHY: It works very well, really, for us. 

CHAIRMAN LOCKYER: Do you ever get alarmed at what 
seemed to be the project overhead in some of the major 
construction projects that Caltrans does? As I recall the 
figures, state law says no more than 20 percent, and the Analyst 
and others suggest that maybe it should be at 25. 

If this was discussed earlier — 

MR. DUNPHY: It was not. 

CHAIRMAN LOCKYER: I would assume that as a person 
from the private sector, you've looked at that; had some 
thoughts about is it true, is it a problem, what to do about it. 

MR. DUNPHY: I will repeat the part of the discussion 
that you and I had in your office, where I believe the greatest 
challenge that I have is what I term the reformation of 
Caltrans, and assuring its responsiveness to its task, and 
finding a 100-year old organization that has developed a culture 
that's very unique unto itself, that all of its culture and 
programming are based on historical issues . And the 
relationship between departments and political appointees is one 
that the departments, I believe, have a general perception that 
they can sweat out the appointees until the next one comes 
along, and they don't change too much. 

So, clearly, my orientation is to make an impact, to 
try to make Caltrans a more efficient organization. 

It is — I can tell you that following, and even 



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71 

prior to the SRI study, the CTC, the California Transportation 
Commission, was on Caltrans ' case about reducing its support and 
its overhead. That began at that time, but the SRI report built 
a fire under everyone, and so that reorganization, creating 
information networks that talk to one another instead of having 
48 different independent, stand-alone computer systems, and 
reorganizing the department so that you can centralize some of 
the primary functions — accounting, purchasing, and so forth — 



9 and get them — every district had it before, and the 



headquarters was acting like a district, doing work, and we're 
separating that and making it a stand-alone district. 

And then the Governor insisted on a pay for 
performance analysis, and trying to get to regulator control, if 
you will, to permit the reward of folks who do better than 
others, and to perhaps deny improved salary levels to those that 
are considered not to be performing. I think that's — 

CHAIRMAN LOCKYER: Are you doing that? 

18 MR. DUNPHY: Yes. 

19 CHAIRMAN LOCKYER: How far down the — 

20 MR. DUNPHY: It's in the management ranks at this 

21 point. 

22 CHAIRMAN LOCKYER: Is it contemplated that would 
extend further? 

MR. DUNPHY: What the department has volunteered for, 
and what I would like to do, is to encourage using Caltrans as, 

perhaps, a model of the reformation of the civil service, so 

ij 

I that we can perhaps introduce those kinds of incentives that 
28 , perhaps differentiate and permit good work to be recognized. 



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It is so difficult within the constraints of all the 
levels of salary levels, and I can't begin to understand the way 
that it's fragmented to different levels. And it is so 

4 difficult to change, basically, the structure of organizations. 

i 

5 I] They find ways to run sideways. 

6 | I think the idea of a reform, and using an agency to 

I 

I begin that process, would be worthwhile. 

8 CHAIRMAN LOCKYER: It sounds like something you have 

some enthusiasm for. 

MR. DUNPHY: I do, and I would encourage you to 

11 ! become interested in that. 

ii 

12 CHAIRMAN LOCKYER: I'm interested. 

13 I'm not persuaded that contracting out, which has 

14 been the sort of historic solution or part of it, that it 

15 j actually saves any money. But we'll debate that at a more 

16 appropriate time, with everybody's studies and — 

17 MR. DUNPHY: But if you will permit, I just love 

18 these opportunities, really, contracting out does a couple of 

i 

19 things. And without regard to how much it costs, because I 

ii think the accountants haven ' t settled out on how much what 
costs. But assuming that they may be similar, the availability 
of a resource in the private sector gives you an opportunity to 
create within Caltrans an optimum size staff. And if you get 
surges in work, you've got the private sector that's trained and 
skilled that can do that. So, you can actually create an 
enhanced facility if you have a private sector that has highway 
and/or bridge engineers contained within its structure . 
28 Many of the former Caltrans people, as you know, 



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7 3 

gravitate into private sector prior to retirement or even 
sometimes after retirement. 

It isn't a matter that the skill doesn't exist, but 
it has to be honed by reuse. So, it provides, again, a utility, 
so that you can come up with an optimum staffing level for 
Caltrans and use the private sector for its surge, if you will, 
of added business. 

When the surge is over, you're back to an optimum 
situation. 

CHAIRMAN LOCKYER: When do you surge? I haven't 
noticed any. 

MR. DUNPHY: Northridge, Loma Prieta. 

CHAIRMAN LOCKYER: Okay, so you mean in times of 
emergency . 

MR. DUNPHY: Yes. 

CHAIRMAN LOCKYER: Not as an ongoing matter. 

MR. DUNPHY: Well, you have to have a capacity that 
handles the projects that are required, and those are — 

CHAIRMAN LOCKYER: A lot. Just bridge review, and 
there ' s a whole bunch of people that do that in kind of a 
routine, ongoing way. 

MR. DUNPHY: Some of it is done on a routine basis, 
and I would expect that there will always be. As a matter of 
fact, the seismic review group suggested that we should always 
be — have an ongoing, because you never know where a fault's 
going to show up. It's just like the Northridge was an unknown 
fault. 

CHAIRMAN LOCKYER: Well, there are probably other 



74 

1 things. We've taken a lot of, time. I, again, find you to be a 
very, very interesting and pleasant man to work with. 

3 MR. DUNPHY: Well, I enjoy the experience, Senator. 

4 CHAIRMAN LOCKYER: We'll have you come back 

5 regularly. 
I 

6 We could talk about the DMV cost overruns, but they 

mostly predate you. I just note that that is a problem, of 

8 course, and you've worked with Mr. Katz and Kopp and others. 

9 MR. DUNPHY: Yes, and I might add that you perhaps 

10 ar e aware that the Governor has assigned me the responsibility 

11 of reviewing that carefully and determining what actions need to 

12 be taken, and I will be doing that in concert with the Attorney 

• 3 General. 

I] 

14 CHAIRMAN LOCKYER: Anything else, Members? 

15 Is there anyone present who wished to make a comment? 

16 This is also a confirmation that does not need action 

17 until next January, and I'd recommend to the Committee that we 

18 J take it under submission at least for time, and we'll consult — 

19 MR. DUNPHY: I'm a January 4th appointee. 
20 
21 
22 

23 back. 

24 CHAIRMAN LOCKYER: Good luck. 
I! 

25 [Thereupon this portion of the 

26 Senate Rules Committee hearing 

was terminated at approximately 
11:00 A.M.] 

— ooOoo — 



CHAIRMAN LOCKYER: Yes, you are. 

Thank you very much. 

MR. DUNPHY: Thank you, and I hope you do invite me 



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CERTIFICATE OF SHORTHAND REPORTER 



I 
2 

I, EVELYN J. MIZAK, a Shorthand Reporter of the 
4 ! State of California, do hereby certify: 
- s That I am a disinterested person herein; that 

6 , the foregoing transcript of the Senate Rules Committee hearing 
was reported verbatim in shorthand by me, Evelyn J. Mizak, and 
thereafter transcribed into typewriting. 

I further certify that I am not of counsel or 
attorney for any of the parties to said hearing, nor in any way 
interested in the outcome of said hearing. 

J^ IN WITNESS WHEREOF, I have hereunto set my hand 
•3 ! this /O day of September, 1994. 



i 



—EVELYN' j 1 \K7X 




X<^ 



Shorthand Repori 



262-R 

Additional copies of this publication may be purchased for $5.00 per copy 
plus 7.75% California sales tax. 

Senate Publications 

1020 N Street, Room B-53 

Sacramento, CA 95814 

(916)327-2155 

Make checks payable to SENATE RULES COMMITTEE. 
Please include Stock Number 262-R when ordering. 



USoo 
v\o-33 









HEARING 

SENATE RULES COMMITTEE 

STATE OF CALIFORNIA 




STATE CAPITOL 

ROOM 3191 

SACRAMENTO, CALIFORNIA 

WEDNESDAY, AUGUST 24,1994 
12:37 P.M. 



DOCUMENTS DEPT. 

SEP 3 1994 

PUBLIC UBRART 



263-R 



SENATE RULES COMMITTEE 
2 STATE OF CALIFORNIA 

3 

4 
5 
6 
7 

8 HEARING 

9 

10 ;. 
11 

12 STATE CAPITOI 

13 ROOM 3191 
'4 SACRAMENTO, CALIFORNIA 
15 
16 
17 

18 „ WEDNESDAY, AUGUST 24, 1994 

19 12:37 P.M. 

20 
21 
22 
23 
24 

25 Reported by: 

26 



27 
28 



Evelyn J. Mizak 
Shorthand Reporter 



11 



APPEARANCES 
2 MEMBERS PRESENT 

SENATOR WILLIAM LOCKYER, Chair 

4 SENATOR WILLIAM CRAVEN, Vice Chair 

Si 

5 i SENATOR RUBEN AYALA 

6 SENATOR ROBERT BEVERLY 

7 i SENATOR NICHOLAS PETRI S 

i 

8 'i 

9 STAFF PRESENT 
CLIFF BERG, Executive Officer 
PAT WEBB, Committee Secretary 
RICK ROLLENS, Consultant on Bill Referrals 
NANCY MICHEL, Consultant on Governor's Appointments 



10 

11 

12 
13 



» 4 ALSO PRESENT 

15 JANANNE SHARPLESS, Member 
State Energy Resources Conservation and Development 

16 Commission 

17 SENATOR HERSCHEL ROSENTHAL 

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28 



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111 

INDEX 

Page 
Proceedings 1 

Governor ' s Appointees : 



5 JANANNE SHARPLESS, Member 

| State Energy Resources Conservation and 

6 | Development Commission , 



7 Introduction and Support by SENATOR HERSCHEL 

ji ROSENTHAL, Chairman, Senate Committee on Energy 

8 and Public Utilities 1 

9 Background and Experience 2 

il 

10 Questions by CHAIRMAN LOCKYER re: 
j 

11 Thoughts about Reorganization 4 

12 Comments to PUC 5 

li 
'3 Ratepayer-subsidized Activites 6 

Major Goals 7 



PUC Functions Versus Energy Commission 
Functions 



Government ■ s Future Role after 
Restructuring 



Questions by SENATOR AYALA re: 

Problems or Barriers Preventing Shift to 

Increased Use of Alternative Fuels for 

Transportation 9 

Need to Educate Driving Public about 

Alternative Fuels 11 

Questions by CHAIRMAN LOCKYER re: 

What Energy Commission Should Consider Doing 

to Address Air Pollution 13 

Motion to Confirm 14 

Committee Action 14 



Termination of Proceedings 14 



28 



Certificate of Reporter 15 



1 P-R-O-C-E-E-D-I-N-G-S 

2 — ooOoo — 

3 CHAIRMAN LOCKYER: Ms. Sharpless, if you'll come 

4 !j forward. There is a quorum present. 

5 Let me begin with as good an apology as I can muster 
here. It's been a horrible day. I guess it's a horrible week 



6 



7 I! and a terrible month. 



8 



SENATOR BEVERLY: Not too good a year, either. 



9 [Laughter.] 



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11 



CHAIRMAN LOCKYER: We've been very — 
MS. SHARPLESS: As you know, Senator, I've been here. 
•2 CHAIRMAN LOCKYER: I know. 

13 MS. SHARPLESS: I've done this, and I know how it is. 

i 

I! 

14 CHAIRMAN LOCKYER: I apologize. I just didn't know 

15 what else to do. There were too many other fires burning that 

16 .J needed immediate attention. 
ij 

I sometimes feel, in a modest way, I understand the 



18 



Governor's problems when he has 26 emergencies in three years 



1 9 1 that he has to deal with. 
I 

20 Senator Rosenthal , why don ' t you start . 

21 i SENATOR ROSENTHAL: Yes. 

11 It's my honor and pleasure to introduce to the Rules 

23 Committee Jan Sharpless, who the Governor's appointed to the 

24 Energy Commission. 

It's not often that I've had good things to say about 

Governor's appointees. Most often I've joined you during 
confirmation hearings to question the nominees to the Energy 
Commission, but Jan, in my opinion, is an exceptional person. 



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So, it's an exception to the rule that I've established. 

For over a decade since I've been Chair of the Senate 
Energy and Public Utilities Committee, I've had opportunities to 
work closely with Jan during her tenure as both Secretary of 
Environmental Affairs, and particularly as Chairwoman of the 
ARB. During that period, she's been a strong and consistent 
advocate for the environment. As part of her efforts to protect 
the environment, she's been a supporter of the clean fuels 
programs and the energy efficiency programs, which combine sound 
energy and environmental policies. 

Jan has a proven record that she ' s capable of 
contributing to California's energy future, and in this case, 
ARB's loss is the Energy Commission's gain. 

I respectfully urge this Committee to support Jan's 

15 confirmation, and I appreciate the opportunity to make this 

16 presentation. 

17 CHAIRMAN LOCKYER: Thank you very much, Senator. 

Ms. Sharpless, I think you have a piece of paper. 

Maybe you want to begin with whatever comments or observations 
you may wish to make. 

MS. SHARPLESS: Well, I want to thank Senator 
Rosenthal, certainly, for those kind words. We have worked 
together in the past, and I think that the bipartisan effort 
that we've been able to forge in these areas has been a benefit 
to the entire state. So, I wish to thank him for those kind 
words . 

What I have to say is very short. I just want to 
indicate that I feel it ' s a real honor and privilege to be given 



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the opportunity to be able to serve on the Energy Commission, 
and if confirmed, I look forward to meeting the challenges that 
face California's energy future. 

My short time there, I've noticed that, like many 
other areas in this state, the energy area is faced with many of 
the same problems: securing and providing reliable and 
affordable sources of energy to a growing population; providing 
an atmosphere that allows California businesses to be 
competitive; and to assure the cost-effective supplies are 
available, while maintaining a healthy environment. 

These areas will, as always, require our best efforts 
as we continue to develop and to implement the creative 
solutions required. 

Because of my background and experience in areas that 
bridge both energy and the environment, I believe I can make an 
important contribution and would like very much the opportunity 
to do so. 

Finally, just a personal note, I am a native 
Calif ornian. I was born and educated here. This is my place, 
my home, and it's the place that has given me these 
opportunities. Consequently, my roots run deep, as does my 
desire to do whatever I can to contribute to the well being of 
this state. 

I wish to thank you for your consideration. 

CHAIRMAN LOCKYER: Thank you. 

Did anyone wish to make a comment? I ' 11 certainly 
entertain those, if members of the audience, other than Senator 
Rosenthal, who, of course, already has. 



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I ' 11 ask if Members have questions . 

I'll begin, if I may, just for your thoughts and 
observations about reorganization, with as much candor as is 
appropriate for a gubernatorial appointee. Maybe an approach 

5 would be your thoughts about the strengths and weaknesses of 

6 each of the current structures and systems, and what 

ij 

7 i consolidations or changes might produce something better and 

i 

8 why? 

9 MS. SHARPLESS: Good. Well, obviously, you've hit on 
the hot topic in the energy area, and certainly it's been a top 
priority by agencies, and private sector, and end users that 
have anything to do with the world of electricity. 

The issue of bringing more competition to the market, 
I think, has started way before the debate that we see today. 
It ' s been — being brought to us partially by changes in the 
federal law, and partially by improvements in technology. And 
because of these two things, I think competition has been on its 

18 I way for sometime. 

19 But, of course, the problem is, the devil's in the 

20 details. The big debate these days is exactly what are the 

21 proposals, what do they mean, where will they take California? 
And there ' s a variety of very substantive issues that must be 
dealt with, including what will the industries that are 
currently monopolies look like when we get through with the 
restructuring? Will they be integrated; will they be broken 
apart; will they be service agencies; will they be selling 
commodities. There's the issue of stranded investment, and who 
will pay. There's an issue of who's going to control the 



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distribution and control of the transmission lines. So, there's 
a number of very substantive issues, along with and including 
government ' s role . 

I think the efforts that we've been seeing have 
certainly generated a lot of momentum of discussion in this 
area. The Energy Commission, as you may or may not be aware, 

7 has been involved in the PUC process and has put comment out . 

. i! 

8 || Our role in that process has been trying to clarify the issues, 
to identify some of the problems that we see, and to suggest 
some remedies . 

The suggesting of the remedies at this point have 
basically been focused on what is it that we're trying to 
accomplish? And that is, is it the reduction of rates, the 
reduction of bills, bringing consumers a greater selection of 
services at more competitive prices , making the system more, as 
the economists like to call it, economically efficient, which is 
something we really support. 

A lot of talk right now is over pooling; pooling of 
resource so that an independent, or some type of organization, 
20 will be able to determine how to deal with the distribution and 
access to transportation — rather, excuse me, transmission 
lines. So, we're very much involved in that. 

We believe — 

CHAIRMAN LOCKYER: Are your thoughts reflected in the 

25 comments at the PUC? 

26 MS. SHARPLESS: Yes, they are very much so, and very 
actively involved. We've been concerned about the progress 
that's been made in the State of California for energy 



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efficiency, for energy diversification, and for technology 
development. With all those public goods, societal goals, the 
concern is what happens under a competitive scenario with those 
programs . 

5 CHAIRMAN LOCKYER: And you're worried about what 

j 

6 happens essentially to those activities that have received some 

subsidy under the current system through ratepayers? 

i 
ii 

8 MS. SHARPLESS: They have been, yes. The rates do 

reflect programs that have enhanced and encouraged energy 
efficiency. 

On the other side of the equation, you have to look 
at the benefits of the program. Those programs, for the most 

13 part, have benefitted the ratepayers. For instance, energy 

14 efficiency has benefitted the ratepayer by avoiding additional 

15 construction of unnecessary power plants. That is a savings. 

16 Some of those things happened more short-term; some of those 

17 things happened more long-term. 

18 Certainly in the area of research and development, 
California leads the way in research and development. That's 

allowed us to diversify our system. Back in the '70s, we were 

i 

21 dependent by 33 percent on foreign oil. We are now — the 

structure in California now is about 90 percent from California 

and other states, 10 percent from Canada and Indonesia. 

ii 

24 So, the technology development has allowed for 

|i 

diversification, and it has increased the security and 
reliability of our system. Someone has paid, but someone has 

27 also received the benefits of those programs. 

28 Under a competitive scenario, we have to decide not 



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to jettison those objectives, which I think have proven to be 
very — 



3 CHAIRMAN LOCKYER: Restate those? You had technology 

development and — 

5 MS. SHARPLESS: We had energy efficiency. We've had 

6 jl technology development and energy diversification. 

' Energy diversification ties back into energy 

|| 
I efficiency and technology development, because they often 

9 support one another. 

But those are the three major goals. And of course, 

not to forget, and include the fact that the law also provides 

12 that environmental costs and benefits be factored into resource 

13 planning. And that's another reason why so many renewable 

14 resources, and cogeneration facilities, have been able to be 

15 sited here in California, because they are environmentally 
preferable from an air quality standpoint. 



17 CHAIRMAN LOCKYER: Of the tasks that someone has to 



address — the development of new energy, the shift to the more 
competitive marketplace, the planning, conservation efforts — 
are there functions there that are more appropriately PUC or 
Energy Commission in your mind? 

MS. SHARPLESS: Well, the Energy Commission has 



23 always been the principle planning and policy making 



organization for statewide energy policy. 



25 CHAIRMAN LOCKYER: Do you think it should stay there, 



or should it shift to the PUC? 



27 MS. SHARPLESS: Judging from — you know, just 



looking at the different mandates of the different 



8 



organizations, and how they're set up, obviously the CEC was set 
up to do that very task. And I think that the history, 25-year 
history, has proven that it has done that job very well. 

4 The PUC really has a multitude of tasks, and 

5 electricity regulation is only one. And it really doesn't look 

6 at, you know, the broad range policy. And energy is bigger than 
just electricity. It involves transportation; it involves fuel 

8 supply and demand; it involves electricity, of course; it 
involves natural gas resources. So, it's really the bigger 
energy pie. 



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separateness is appropriate. 

MS. SHARPLESS: Yes, under — you know, we have to 
see what happens under the competition scenario. I would say 
yes to that question. What government's roles, how they will be 
redefined under a competitive scenario, I think, is going to be 
one of the issues that definitely this body and those who are 



18 currently under discussion will need to consider. 

19 But in terms of an overall energy — 

20 CHAIRMAN LOCKYER: What are the choices that we're 

21 ] going to have to make, the government's role? 

22 MS. SHARPLESS: I think it depends on how the 

23 restructuring is defined. I think it depends on what happens to 

24 j the current utilities; what they look like; what their roles are 
going to be; whether there's going to continue to be core 
service. There's just a variety of questions and answers that 
have to be addressed that will then spin off as to what the 
government role will be. 



1 I don't mean to be evasive, but it's kind of a 

I difficult question to answer without knowing what the 
structure's going to look like. 

CHAIRMAN LOCKYER: And that's really more of a PUC 

5 venue? 

6 MS. SHARPLESS: No, because the PUC, as you know, 

7 jj only regulates investor-owned utilities. It doesn't regulate 
the municipalities. Its proposal currently is only directed at 

9 investor-owned utilities. 

10 Thirty percent of the electricity out there is 

" supplied by municipalities. So, municipalities have to be 
12 brought into this proposal right now, and that is not under the 



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13 PUC purview. 

14 CHAIRMAN LOCKYER: That's where the Energy Commission 

15 comes in, or whom? 

16 MS. SHARPLESS: That's where we all come in, I think. 
The table has to have everybody represented, and right now, not 
everybody is. 

CHAIRMAN LOCKYER: Other questions? Senator Ayala. 
SENATOR AYALA: As you well know, state and federal 
21 laws call for an increased use of alternative fuels for 

transportation, such as methanol and ethanol, and natural gas, 
23 jj and electricity. 

What problems or barriers stand in the way of a shift 
to a more economically and environmentally sustainable 
transportation fuel future, and how can the barriers be 



overcome? 



28 



MS. SHARPLESS: This is barriers to bringing 



10 



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! 10 

1 alternative fuels into fleets? 

2 SENATOR AYALA: Promote and increase the use of these 

3 alternatives for better clean air. 

4 MS. SHARPLESS: In fleets? Is this directed at how 

5 I do you do it in fleets? 

6 SENATOR AYALA: What's standing between attaining 
that goal of using more alternative fuels, and how do we 

8 overcome that barrier? 

9 MS. SHARPLESS: Yes, well, as you know Senator, 
that ' s something that I ' ve worked on for quite a few years . 

I think that if you look at fleets, there is — some 
people say that there is an easier, that's an easier market to 

13 penetrate than the general public, when you're trying to bring 

14 alternative fuels into the market. 

15 One of the problems with alternative fuels, of 

16 ; course, is the fuel supply. And until there is a more 

17 diversified fueling system out there, people naturally become 

18 concerned about where they're going to buy their fuel and how 

19 much it's going to cost. And it ' s a supply and demand kind of 

20 problem. Until you get a larger supply, the demand, you know, 

21 the demand means that costs are going to be high. You need to 
increase your demand in order to make it more cost-effective. 

So, that's one of the reasons why, in the alternative 
fuel area, people have looked at fleets, because they're sort of 
a captured market. You can do central fueling. The distance 
that people drive is more constrained and confined. And as you 



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build a greater demand through the market system, then the 



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fueling system will follow, and then you'll be able to bring 



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more alternatively fueled vehicles into a larger market. 

But it really has been the chicken and the egg, 
seriously. That it's very difficult to bring alternative fueled 
vehicles in if there's not an adequate supply out there. And of 
course, without an adequate supply, it means that your costs are 
going to be high, and then you're competing an already 
established conventional fuel. And people who are in business, 

I obviously, are concerned about cutting margin and making profit. 

I 

9 'So, that becomes a difficulty. 

I was on the President's Federal Fleet Program, and 

i 

i was back there as a California representative, trying to 
overcome some of those barriers that you've mentioned. And I 
think that they're making slow progress. 

SENATOR AYALA: Are we premature because of lack of 
information, or education on the part of the general public, to 
view alternative fuels? A lot of people really don't know what 
they are and where they can obtain them. 

Is that part of the problem, that we've got to 
somewhat educate the driving public to these new alternative 

20 fuels? 

21 MS. SHARPLESS: The kind of questions that you and I 
ask when we go in to buy a vehicle, of course, is: how much 
added cost is this going to be; how much more is the fuel going 
to be; will I be able to resell my vehicle. It's kind of basic 

25 questions. 

26 The cost of the vehicle, depending on what type of 
fuel it's using, there is an incremental increase, of course, in 
cost. And if people are concerned about not being able to find 



28 



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the fuel, or if they can find the fuel, it's going to be a lot 
more expensive, it becomes a market barrier. It becomes a 
detriment . 

So, one of the ways that you do that is, you take it 
to the niche where you think that it has the greatest 
practicability, and then try to build the supply. 

I think eventually there are niche markets here, and 

8 I think eventually alternative fuels will find their way into 

9 the market, but it does take time; it does take education. 

i! 

10 SENATOR AYALA: When you say "eventually, " what are 

11 we talking about? Fifteen years? 

12 MS. SHARPLESS: No, if you look at the federal fleet, 

13 if you look at the energy program, the federal energy program, 

14 ij the Congress and then the President accelerated that timeframe, 

15 ! you're looking at — I can't give you the percentages — but 

16 exact percentages were laid out in that legislation, in that 

17 statute, and by the President's Executive Order to be met by the 

18 federal government, and to be met by states. So, you will be 

19 seeing greater penetration. 

20 SENATOR AYALA: I don't see a mass movement on the 
part of the driving public to go to these kind of fuels yet. 



21 



There's one there, but not much interest so far. 



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MS. SHARPLESS: Well, one of the things that happened 
is that we established a fuel neutrality policy when we 
developed the low emission vehicle program. And by doing that, 
we didn't designate what fuel would be the winner. 

Obviously, the petroleum companies have come forth 
with a reformulated gas that, in combination with cleaner 



23 

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13 

technologies, have been able to come in and compete with those 
alternative fuels . 

So, it hasn't been as fast as some people originally 



4 I thought it would happen when we adopted the LEV program, but I 

5 definitely think that there ' s going to — natural gas has an 

6 obvious niche market, and there's going to be a great 
penetration of natural gas vehicles . There will continue to be 

8 some methanol vehicles, although not as great a penetration as 

9 we thought originally. I think natural gas is going to — 
10 you're going to see a lot of that, though, coming into the 
li fleets, and, of course, electricity where it's appropriate. 

12 SENATOR AYALA: Thank you very much. 

13 CHAIRMAN LOCKYER: We heard a lot about the fuel 

14 neutral policy on Monday. 

i 

15 MS. SHARPLESS: I was here. 

16 CHAIRMAN LOCKYER: You've mentioned alternative fuels 

ii 

17 and technologies that would impact air pollution problems. 

18 Is there anything else that the Energy Commission 

19 could or should consider doing to address air pollution? 
i 

20 MS. SHARPLESS: The law requires, of course, this 

21 agency to include environmental impacts into its resource 

22 planning, so that is very much a part of what the Energy 
Commission does, both in the electricity area, where we identify 
the environmental costs and benefits of different technologies 



25 and incorporate them in our resource planning, and also we're 



very much involved in the technology development of renewable 



27 resources: biomass, wind, cogeneration. So, that very much 



28 



supports that effort, as well as on the transportation side. 



10 

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14 

1 We're very much involved and cooperate with the air quality 
agencies on research and technology demonstration projects for 
alternative fuels. So, we've sort of been through that. 

4 CHAIRMAN LOCKYER: Are there additional questions? 

5 Senator Craven, I'd recognize you for a motion on the 

6 | matter. 

7 SENATOR CRAVEN: Very good, I move. 

8 CHAIRMAN LOCKYER: All right, the motion to recommend 
confirmation to the Senate. 

Call the roll, please. 

SECRETARY WEBB: Senator Ayala. Senator Beverly. 

12 SENATOR BEVERLY: Aye. 

13 SECRETARY WEBB: Beverly Aye. Senator Petris . 

1 4 SENATOR PETRIS: Aye. 

'5 SECRETARY WEBB: Petris Aye. Senator Craven. 

16 , SENATOR CRAVEN: Aye. 

17 SECRETARY WEBB: Craven Aye. Senator Lockyer. 

18 CHAIRMAN LOCKYER: Aye. 

19 SECRETARY WEBB: Four to zero. 

! 

20 We might put it on call so Senator Ayala can vote 

21 i when he returns. 

22 MS. SHARPLESS: Thank you very much. 

23 CHAIRMAN LOCKYER: Good luck. 

I 

24 [Thereupon this portion of the 
i 

25 Senate Rules Committee hearing 

26 was terminated at approximately 

27 1:00 P.M.] 

jj 

28 jj — ooOoo — 



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CERTIFICATE OF SHORTHAND REPORTER 

I, EVELYN J. MIZAK, a Shorthand Reporter of the 
State of California, do hereby certify: 

That I am a disinterested person herein; that 
the foregoing transcript of the Senate Rules Committee hearing 
was reported verbatim in shorthand by me, Evelyn J. Mizak, and 
thereafter transcribed into typewriting. 

I further certify that I am not of counsel or 
attorney for any of the parties to said hearing, nor in any way 
interested in the outcome of said hearing. 

Jfi^ IN WITNESS WHEREOF, I have hereunto set my hand 
this / day of September, 1994. 




^^ 



2*^ 




rELYN tf. MKAK 
Shorthand Reporter 



/^^ 



263-R 

Additional copies of this publication may be purchased for $3.75 per copy 
plus 7.75% California sales tax. 

Senate Publications 

1020 N Street, Room B-53 

Sacramento, CA 95814 

(916)327-2155 

Make checks payable to SENATE RULES COMMITTEE. 
Please include Stock Number 263-R when ordering. 



L5oo 




-. HEARING 

SENATE RULES COMMITTEE 

STATE OF CALIFORNIA 







STATE CAPITOL 

ROOM 3191 

SACRAMENTO, CALIFORNIA 

MONDAY, DECEMBER 5,1994 
1:10 P.M. 



DOCUMENTS DEPT. 

DEC 2 3 1994 

SAN FRANOiSCO 
PUBLIC LIBRARY 



264-R 



SENATE RULES COMMITTEE 
STATE OF CALIFORNIA 



HEARING 



STATE CAPITOL 
ROOM 3191 
SACRAMENTO, CALIFORNIA 



MONDAY, DECEMBER 5, 1994 
1:10 P.M. 



Reported by: 



Evelyn J. Mizak 
Shorthand Reporter 



11 



APPEARANCES 

2 MEMBERS PRESEN 1 ] 

3 SENATOR WILLIAM LOCKYER, Chair 

4 SENATOR RUBEN AYALA 

5 SENATOR ROBERT BEVERLY 

6 SENATOR JOHN LEWIS 

7 SENATOR NICHOLAS PETRIS 
8 

9 STAFF PR Lil : 

10 CLIFF BERG, Executive Officer 

11 PAT WEBB, Committee Secretary 

12 RICK ROLLENS, Consultant on Bill Referrals 

13 NANCY MICHEL, Consultant on Governor's Appointments 

14 ALSO PRESENT 

15 DEAN R. DUNPHY, Secretary- 
Business, Transportation and Housing Agency 

i < 

JOANNE C. KOZBERG, Secretary 

17 State and Consumer Services 

18 SENATOR DAN BOATWRIGHT 
19 
20 

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Ill 

INDEX 

Page 
Proceedings 1 

Governor ' s Appointees : 

DEAN R. DUNPHY, Secretary 

Business, Transportation and Housing Agency 1 

Questions by SENATOR PETRIS re: 

CalTrans Move to Eliminate BCDC 1 

Questions by CHAIRMAN LOCKYER re: 

Sexual Harassment Problems at CalTrans 5 

Contemplated Review of Departmnet 6 

Questions by SENATOR PETRIS re: 

Critical Report by Stanford Research Institute . . 6 

Discussion of Time Constraints 10 

Questions by SENATOR AYALA re: 

CalTrans Policy on Sound Walls 12 

Motion to Confirm 12 

Committee Action 13 

JOANNE C. KOZBERG, Secretary 

State and Consumer Services 13 

Statement in Support by SENATOR DAN BOATWRIGHT .... 13 

Questions by CHAIRMAN LOCKYER re: 

Dispute over Building Codes Standards 14 

Questions by SENATOR PETRIS re: 

California Museum of Science and Industry .... 15 

Motion to Confirm 16 

Committee Action 16 

Termination of Proceedings 16 

Certificate of Reporter 17 






P-R-O-C-E-E-D-I-N-G-S 
— 00O00 — 

CHAIRMAN LOCKYER: We have two confirmations. First 
is Mr. Dunphy as Secretary of Business, Transportation and 
Housing. 

I will mention, of course, Senator Lewis wasn't with 
us at that time, but we did have a hearing and discussion, and a 
very interesting exchange, including your notes to yourself. 

Let me just say thank you for your willingness to 
reappear briefly. Mostly, I think, we'll ask, unless you would 
have something else to add to your prior testimony, Mr. Dunphy, 
we'll ask you to just say hello and ask Members if they have 
questions or concerns . 

MR. DUNPHY: I would consider that my good fortune if 
we did not review the entire one hour previous testimony, thank 
you. 

CHAIRMAN LOCKYER: Any Members on this? Senator 
Petris . 

SENATOR PETRIS: There have been a couple new 
developments since you were here before us last, and they affect 
me, so I thought I'd ask you some questions. 

I was startled to read in the press the other day 
that CalTrans is moving to eliminate BCDC, and I've been 
targeted to carry the bill to do that. 

Now, that's either a nasty joke, or somebody doesn't 
have a good sense of humor, since I was the author of BCDC, 
and I feel it's an excellent agency. I have no intention of 
carrying that bill, and if it's introduced, I intend to oppose 



it very strongly. 

What is CalTrans ' problem with BCDC? Can you speak 
to that? I know you're not directly at CalTrans, but you're the 
Super Agency Director. 

MR. DUNPHY: I think that the subject first is in a 
proposal stage, which being a proposal between the Agency and 
the Governor, is not one that I can comment on specifically. 

However, I would be happy to — 

SENATOR PETRIS: Do you mean they bypassed you and 
went directly to the Governor? 

MR. DUNPHY: No, it came through my office, but 
because of the nature of the relationship between the Agency and 
the Governor's Office in a proposal stage, I'm not — there is 
no policy, so I'm not able to comment on it. 

But I would be so bold as to volunteer the thought 
that BCDC, authored by yourself, performed a valuable function 
in the saving of the Bay tidelands, the development of a plan 
which was adopted, I believe, in '69, which guided the way in 
which the Bay would be developed, saving it from landfill, 
quality of water, et cetera. 

But as we go through our life in government and in 
private enterprise, we find that the overlapping and increasing 
layers of what you might refer to as bureaucracies — of the 
local government, state government, and regional government 
having to pass on various issues — it tends to be a burdensome 
problem to the accomplishment of objectives, and taking a great 
deal of time to indeed do things which could be done more 
quickly by local government and/or, in this case, by the 



8 



1 California Coastal Commission. 

2 So, I think we're all conscious, particularly as our 

3 economy becomes more strained, to endeavor to reduce the 

4 layering of approvals and their processes. And I think that 

5 that is probably at the heart of the suggestion. 

6 SENATOR PETRIS: Well, the way I see it, that has 
some flaws in it. 

First of all, BCDC is probably the most prominent of 
9 all state agencies that require local government representation 
10 on it. There are members of boards of supervisors serving on it 
by virtue of the fact that they have a local office, and members 
of city councils. It's a very large body. It includes 
Governor's appointees, but it also includes these other people 
for that very purpose . 

It's also the first agency in the history, that I 
know of, in the state that requires them to act promptly on 
applications. If they don't act within 30 days, whatever 
application is involved is deemed to be approved. So, they 
can't just sit around and stall it like so many other agencies 
do, either purposefully or through inefficiency, and so forth. 



11 

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21 So, that's the reason I'm expressing a concern. It's 

:: not only the fact that I was the author. I'm proud of that, but 

23 it's the fact that I think there is still continuing need to do 

24 that and to keep local government directly involved, rather than 
just having a passive view of the thing. 

Now, the only problem of the kind you mentioned that 
was covered in the press account, there may be others, maybe you 
can enlighten us on what the other problems are with the fly 



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over on Cypress along the east shore of the freeway, connecting 
up to San Francisco. I strongly supported CalTrans in that, and 

3 I opposed BCDC. And I say that because I have maintained a 

4 fairly independent outlook. When other issues arise, usually I 

5 find myself coming down on the side of BCDC, especially on the 

6 conservation issues. On that one, I strongly supported 

7 CalTrans . 

I would think, having won that fight, they could walk 

9 away from it and not turn around and ask for the abolition of 
the agency. That smacks of a little bit of peevishness on the 
part of CalTrans . 

12 Are there other major obstacles in the way of 

13 CalTrans that have been presented by BCDC, or is it just the 

14 layering? 

15 MR. DUNPHY: I think it's basically the layering, and 

16 that issue, as you know, was a very contentious one, and it had 

17 a great deal to do with getting the Cypress Freeway underway, it 

18 being a very early first contract that was needed. And I would 
probably agree that there was a certain amount of angst 

20 associated with that. 

21 CHAIRMAN LOCKYER: I should point out, Senator, this 
- Committee's appointee to BCDC voted against us, those of us who 

urged him. Perhaps we ought to review that, and some of the 
blame falls on our own appointees. 

25 SENATOR PETRIS: Could be. I think we ought to 

26 revisit that. 

I have some other areas I wanted to ask about . 
CHAIRMAN LOCKYER: If I may — 



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1 SENATOR PETRI S: Yes, you go ahead. 

2 CHAIRMAN LOCKYER: There was a recent press 

3 discussion, legislative hearings, and considerable turmoil 

4 associated with sexual harassment problems alleged in CalTrans . 

5 I guess there's been investigations, claims of white-wash, and 
cover-up, and so on. 

What would you contemplate now, if anything, to 

8 maintain some objective and impartial, fair evaluation of the 

9 contentions that there are problems? 
MR. DUNPHY: Well, I suppose there are two issues. 

First, there is the District Nine, which is Bishop, which caused 
the attention, press attention. 

And separating that for the moment, CalTrans has a 
fairly energetic program of training. They have spent several 
million dollars on training and sensitizing folks to a changing 
culture and environment that is necessary and appropriate. I 
think they are doing a reasonable job in that regard. 

The issue, then, turning to district Nine, is one 

19 that has a history of several years. As you may recall from 

20 some of the testimony, one of the witnesses, or one of the 

21 persons questioned had to deal with an issue that was a number 
of years old. And I strongly suspect that historically, as a 
department changes, there are 75 male percent in CalTrans, 
females 25 percent. But as the evolution of the effort to make 
it more accommodating to all persons of all types and sexes, et 
cetera, that you're going to have isolated instances of people 
who have not paid attention to the training. And where you have 
18,000 persons employed by the department, it's perhaps not 



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1 unexpected you're going to have a renegade that's going to give 

2 you a problem. 

3 But their training program is fairly discreet and, I 

4 think, effective. So that what we have to do is make sure that 

5 it maintains its effectiveness and to eliminate these other 

6 activities. 

7 CHAIRMAN LOCKYER: Do you contemplate any Agency 

8 level review, investigation, or action with respect to the 

9 District Nine problems? 
MR. DUNPHY: I, as the Secretary, will demand of the 

Director a full explanation of what is to transpire as a result 
of that activity. 

13 CHAIRMAN LOCKYER: Has he offered that yet, the 

14 Director? 

MR. DUNPHY: Not to my knowledge, sir. 
CHAIRMAN LOCKYER: There's some suggestion that maybe 

the complaint has been filed before the federal EEOC, and that 
they might be an independent reviewer. That seems sensible to 
me. I hope if there's anything the Agency needs to do in the 
way of assenting or permitting that re-examination, that might 
be a way to do it . 

MR. DUNPHY: They'll have our full cooperation and 
encouragement . 

24 CHAIRMAN LOCKYER: Senator Petris . 

25 SENATOR PETRIS: Thank you, Mr. Chairman. 

26 Now that we've covered CalTrans ' desire to abolish 
BCDC, I find the report here from the Stanford Research 
Institute International that says, among other things, that 



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1 CalTrans, quote: 

2 "... cannot be managed effectively with 

3 the present lack of policy direction, lack 

4 of flexibility, lack of performance 

5 measures, and ineffective system of reward 

6 and disciplinary procedures." 
That's a rather severe criticism of management style at 

8 CalTrans . So, we're looking for answers to that. 

9 I wonder if you're familiar with that report? It 

10 came out this year. 

11 MR. DUNPHY: Yes, I am. 

12 SENATOR PETRIS: It also recommended a constitutional 

13 amendment to separate some of the functions out of the overall 

14 Agency, and to increase efficiency, put them somewhere else; 

15 separate them from Business, Transportation. 

16 I'd like to have your reaction, number one, whether 

17 you agree with some of the criticism, and what plans you have 

18 for correcting the situation if you agree that they're valid. 

19 if not, we'll go on to the next question. 

MR. DUNPHY: Well, I would — I received that report 

on behalf of the Governor, I believe it was in February of this 
year. 
23 The Director of CalTrans, General Van Loben Sels, 

received it from me, and had agreed, even before the report was 

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made public and finalized, that significant corrections were 
needed in the Department relative to performance, et cetera. 



27 Relative to the SRI recommendation that 



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regulatory activities put into either another agency or 
distributed, I personally disagree with that recommendation, but 
I can also go further and try to identify, if I can, the origin. 

At the time that that report was both requested and 
being developed, I was a member of the California Transportation 
Commission. At that time, the Agency included Trade and 
Commerce in the beginning of my term. It was a very broad-based 
Agency with many activities, such to the extent that 
Transportation was not given the interest and attention that I 
believe I am bringing to the Agency. 

Since my arrival, I was successful in having the 
administration approve the appointment of an Under-Secretary so 
that among the various agencies I have, I have the only two 
Under-Secretaries of agencies, one of which is the 
Under-Secretary for Transportation. And I have dramatically 
increased the attention and oversight of CalTrans by virtue of 
that activity. 

Because of my own prior interest, I served as 
Chairman of the Board of the San Diego Transit Corporation for 
five or six years prior to joining the California Transportation 
Commission, and prior to that I was a building contractor, 
commercial building contractor in San Diego. So, I have a 
transit background. I have an interest in the economic 
potential of the highway system, and because of my service on 
the Transportation Commission, I understand the importance of 
multi-modal systems, transit, throughout the state. That is 
highways, rails, short urban commuter, inner city, et cetera, 
and the development of the ports. 



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So, I believe that I'm able to bring a focused 
attention to transportation, while at the same time within the 
Agency, I have ten or eleven other departments that are 
basically regulatory in nature — the Department of 
Corporations, S&L, State Banking, et cetera — which are handled 
by the Under-Secretary. And because they are not quite the 
lighting rod of some of the other activities, I believe that 
I've been able to express a competence in that management 
oversight. 

The alternative would be to set up either a separate 
agency or find another home for the other regulatory 
departments. I just believe that the Governor is well served, 
and the Legislature is well served, by my managing those in one 
agency. 

So, I do disagree with that. 

Now, not trying to avoid your other question about 
the need for reform, one of the cards that I carry with me, that 
Senator Lockyer refers to frequently, has to do with a reform of 
CalTrans . Several months ago, when you asked me what my most 
important objective is, I said that it is indeed the reformation 
and/or transformation of CalTrans in making it a more 
user-friendly, efficient, smaller organization that can perform 
under more limited, efficient circumstances. 

As you're aware, I think we're all aware, of the fact 
that transportation revenues have been on the decline for a 
variety of reasons, and yet the need for expanding capacity of 
highway, and then providing alternative transit by way of rail, 
commuter rail, et cetera, all of those are growing. So, we have 



10 

1 to be better managers and more efficient. 

2 Because there is not much appetite for increasing 

3 revenues through taxes, we have to first attack it through 

4 efficiencies, and that Department has to be at the center of 

5 that activity. And I am spending a great deal of time on it, 

6 and I do want to give General Van Loben Sels credit for having 
instituted a number of changes already which are improving it. 

8 But I also want to take this moment, however, to 

9 recall your first comment about the SRI report, which said that 

10 it ' s important to do a couple of things strategically and 

11 structurally that permit the Department to be more effective. 

12 One of those is a constitutional amendment to permit contracting 

13 out. The private sector has a great capacity to deliver 

14 product, whether it be engineering or constructing, the private 

15 sector has been the constructor of freeways, et cetera. But 

16 because of court interpretations, which are currently being 

17 challenged, the Department has been denied the opportunity to 

18 have private sector engineers to design work, and is under an 

19 edict now to reduce that amount. 

20 I think that ' s very important and has far reaching 

21 implications for the rest of state government. 

22 CHAIRMAN LOCKYER: Mr. Dunphy and colleagues, I want 

23 to remind you that, unlike the normal day when Rules is meeting, 
and they aren't waiting for us on the Floor, they are waiting 
now. We can't do anything about that, other than let the 
appointments die, which is okay with me, but it's not something 



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: I'd recommend . 



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I just want all of you to be aware that we have some 



11 

1 time constraints because we ' re acting at the same time that 

2 Senators are milling around, moving vacancies on the Rules 

3 Committee and such. 

4 An update for those that haven't been in front of the 

5 television, 40-40 is the current score in the Assembly. 

6 Senator Petris 

7 SENATOR PETRIS: We won't be meeting again on this 

8 because we're up against a deadline. 

9 CHAIRMAN LOCKYER: This is it, unless we ask the 
1° Governor to withdraw the nomination and resubmit it, or 

11 something like that. 

12 SENATOR PETRIS: Is that possible? 

13 CHAIRMAN LOCKYER: It is. 

14 SENATOR PETRIS: I thought there was some legal 

15 obstacle to that. 

16 CHAIRMAN LOCKYER: No, he can do it. 

17 SENATOR PETRIS: The problem is, we have a lot of 

18 good questions that need to be addressed, I think: earthquake 

19 repairs, and other things which are mostly CalTrans . 

20 Maybe we should ask CalTrans to come in as well. 

21 I don't feel comfortable bringing out this criticism 

22 of CalTrans. There's a building in my district, a beautiful 

23 12-story office building, that has my name on it, and it's a 
CalTrans building. So, it's difficult for me to give publicity 
to any criticism of CalTrans' effectiveness and efficiency. 

I will tell my colleagues that when that building was 
dedicated, the CalTrans representatives and the private 
builder's representative, a big company from L.A., both 



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1 SECRETARY WEBB: Lewis Aye. Senator Petris . 

2 SENATOR PETRIS: Aye. 

3 SECRETARY WEBB: Petris Aye. Senator Lockyer. 

4 CHAIRMAN LOCKYER: Aye 

5 SECRETARY WEBB: Five to zero. 

6 CHAIRMAN LOCKYER: Place the matter on call briefly. 

7 Thank you, sir. 

8 Ms. Kozberg, welcome back. Did you want to begin 

9 with any observations or comments, an update from your previous 

10 discussion? 

11 MS. KOZBERG: No, in the interest of your time, I'd 
be very happy to answer your questions directly. 

13 CHAIRMAN LOCKYER: Are there questions from Members? 

Senator Boatwright. 

15 SENATOR BOATWRIGHT: Yes, Mr. Chairman, Members. 

16 Just very briefly, I have oversight, incidentally, on 
CalTrans . I would invite you people to come to my Subcommittee 
4, because I have their budget. I tried to do some of the 
efficiencies, and they were vetoed. I invite you to come to my 



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I am here to speak for Ms. Kozberg because I believe 

22 that she's going to bring something to this job, and she has 

23 already, and that is a willingness to work with the Legislature. 
I found in her previous position and in her current position 
that I believe she wants to follow the law, to do things that 
are right. 

I don't always agree with everything that's done, but 
as long as they do things according to the law, that's okay with 



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1 emphasized the fact that this building was brought ahead of 

schedule and under budget. Whereupon, I replied that that's the 

3 secret. This is the dawn of a new era. If you want public 

4 projects to come up ahead of time and under budget, you name 

5 them after a flaming liberal. 

6 [Laughter.] 

7 SENATOR PETRIS: I'll withhold any further questions. 

8 SENATOR AYALA: I have a short question. 

9 Does CalTrans have a policy that pertains to sound 

10 walls? 

11 H? . DUNPH1 : ie£ 

SENATOR AYALA: Can I have a copy of those policies? 

13 MR. DUNPHY: Yes, sir 

14 SENATOR AYALA: Thank you. 

15 MR. DUNPHY: We are spending about $10 million a year 
on the installation of sound walls, and they are effective. 

1 7 CHAIRMAN LOCKYER: Other comments or questions? 

18 Senator Beverly. 

SENATOR BEVERLY: If you're ready for a motion, I 

20 move that we recommend confirmation. 

21 CHAIRMAN LOCKYER: The motion is properly before us. 
Call the roll, please. 

23 SECRETARY WEBB: Senator Ayala. 

24 SENATOR AYALA: Aye. 

SECRETARY WEBB: Ayala Aye. Senator Beverly. 
SENATOR BEVERLY: Aye. 



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SENATOR LEWIS: Aye. 



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me . 

I'm also confident that she recused herself in the 
matters involving the California Museum of Science and Industry. 
Senator Petris, myself, Senator Alquist were probably the 
leading foes as to what has happened down there . I don ' t agree 
with what's happened, but I do believe that she has conducted 
herself honorably, and I would urge her confirmation. 

CHAIRMAN LOCKYER: Thank you, Senator. 

Questions from Members? 

Maybe I could begin with just a quick one. 

I remember sort of a correspondence blizzard of 
various folks that were involved in something that was beyond my 
expertise, other than recognizing there was some dispute. It 
had to do with the building codes standards, and different 
organizations that used to, I guess, for 30 years or something, 
jointly prepare these codes for the Building Standards 
Commission. 

Has that been worked out? Have you been able to 
effectuate a meeting between the different — 

MS. KOZBERG: We are — all the parties are meeting 
on December the 8th, and we are going to try and bring all 
parties to work together. 

CHAIRMAN LOCKYER: Should we vote on December 9th? 
Do you feel pretty confident about bringing this off? 

MS. KOZBERG: I think so, because there are a number 
of issues beyond just the publishing of codes that we need to 
get to, and especially if we're moving into a whole new 
technology where local government will become in partnership, we 



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1 all do need to work together. 

2 CHAIRMAN LOCKYER: I guess I'm obligated on advice of 

3 counsel to indicate that our confirmation votes never have 

4 anything to do with your administrative duties or actions. 

5 Senator Petris, did you have anything here? 

6 SENATOR PETRIS: Yes, I wanted to touch briefly on 
what Senator Boatwright said. I was one of those who was active 

8 in the Museum of Science and Industry. 

9 What is the current plan? 
MS. KOZBERG: Senator, I could have Under-Secretary 

Ann Sheehan come and speak to you about that . I am recused on 

12 that issue. 

13 SENATOR PE'TRIS: Is she here now? 

MS. KOZBERG: I believe she has a smog check meeting 

15 now . 

16 SENATOR PETRIS: On her car or somebody else's? 

17 [Laughter.] 

18 MS. KOZBERG: On the state program, Senator. 

SENATOR PETRIS: Can you tell us what her program is 

with respect to this? 

MS. KOZBERG: Senator, I'm not knowledgeable about 
that. I am recused on the Science and Industry Museum, but I 
could make sure that the Under-Secretary sees you immediately. 

24 SENATOR PETRIS: I think I met with her once before. 

25 Is her word the official word? 

MS. KOZBERG: Senator, I'm not knowledgeable about 

the Museum of Science and Industry. 

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had been, we may not have the problems we have. 

Well, okay. 

CHAIRMAN LOCKYER: Other Members? Senator Beverly. 

SENATOR BEVERLY: I move we recommend confirmation. 

CHAIRMAN LOCKYER: All right, we have an appropriate 
motion made. Call the roll, please. 

SECRETARY WEBB: Senator Ayala. 

SENATOR AYALA: Aye. 

SECRETARY WEBB: Ayala Aye. Senator Beverly. 

SENATOR BEVERLY: Aye. 

SECRETARY WEBB: Beverly Aye. Senator Lewis. 

SENATOR LEWIS: Aye. 

SECRETARY WEBB: Lewis Aye. Senator Petris . Senator 



Lockyer . 



CHAIRMAN LOCKYER: Aye. 

SECRETARY WEBB: Four to zero. 

CHAIRMAN LOCKYER: Leave it on call briefly. 
[Thereupon this portion of the 
Senate Rules Committee hearing 
was terminated at approximately 
1:42 P.M. ] 

— ooOoo — 



17 

1 CERTIFICATE OF SHORTHAND REPORTER 

2 

3 I, EVELYN J. MIZAK, a Shorthand Reporter of the 

4 State of California, do hereby certify: 

5 That I am a disinterested person herein; that 

6 the foregoing transcript of the Senate Rules Committee hearing 
was reported verbatim in shorthand by me, Evelyn J. Mizak, and 

8 thereafter transcribed into typewriting. 

9 I further certify that I am not of counsel or 
attorney for any of the parties to said hearing, nor in any way 
interested in the outcome of said hearing. 

IN WITNESS WHEREOF, I have hereunto set my hand 



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13 this (O day of December, 1994. 




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Shorthand Reporter 
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264-R 

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